MANILA – – Finance Secretary Carlos Dominguez III said businesses in the business process outsourcing (BPO) sector should not expect to get additional incentives to lift their plateauring growth as the government is firm on rationalizing fiscal incentives.
He said the BPO sector is already enjoying huge tax perks since “they only pay five percent on practically net income,” which he said should be reviewed.
He added that the BPO sector’s main challenge right now is not tax but the increasing studies and demand for artificial intelligence (AI).
“That is the challenge that they are facing that’s why they are plateauing. So they have to address that issue,” he said.
Department of Finance (DOF) is pushing for the reform of the incentives being given to businesses in line with the bid to ensure that the state gets the necessary revenues to fund its social protection and massive infrastructure program.
The Duterte administration’s infrastructure program, dubbed Build, Build, Build, has a programmed allocation of at least PHP8 trillion until the end of its term in mid-2022.
Dominguez said the review of the tax incentives being extended to businesses is part of the tax reform program’s Package 2, which DOF officials submitted to Congress last Jan. 15.
He said the current government wants the incentives to meet four standards namely targeted, time-bound, transparent and will greatly benefit the people.
He said the government wants to encourage more businesses that cater to current trends such as robotics and those involved in digital technology, among others.
He said incentives should be time-bound so that players will further improve their operations and be at par with the rest of the world, citing that there are certain sectors that have been benefiting from incentives in the last 40 years even if they do not have to.
He discounted concerns that the country will lose its competitiveness if incentives given to businesses are rationalized.
He said there are around 14 investment incentives-giving agencies in the country, way more than the one in two agencies in other jurisdictions.
“Don’t you think it’s time that we rationalize what we’re doing? We are one of the generous in the world and yet our FDI (foreign direct investment) is low. You better think why. Is it because the infrastructure is bad? Is it because that in the past peace and order was bad? So you have to think about these things,” he added.