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BPOs remain competitive, according to DOF

by: Mary Christine Galang

Friday, July 28, 2017 | Outsourcing News |

The Department of Finance (DOF) assured the business process outsourcing (BPO) sector will maintain its global competitiveness in the export market, despite the implementation of a new, progressive tax reform.

BPO companies to remain VAT exempt

Finance Undersecretary Karl Kendrick T. Chua said in a statement that the foreign services of BPO companies in special economic zones (SEZs) or "eco-zones," are not directly affected by the tax reform program and will remain exempt from value-added tax (VAT).

In addition, Chua also clarified that businesses outside SEZs, as well as those registered under the Board of Investments (BOI) will retain their zero-rated status.

"The fear that the Philippine BPO industry will lose its competitiveness because of the proposed tax reform has no basis. Certain industry stakeholders are likely misinterpreting the provisions of the bill," Chua said. "There is no change in tax policy here for exporters."

"The concerns raised by the BPO sector against tax reform appear to be misplaced. They will remain competitive as demand for their services are driven by the high quality of service and talent they offer. The tax policy in the BPO sector will remain the same even after TRAIN," Chua added.

The proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) seeks to limit the zero-VAT rating to exporters and remove preferential treatment to their suppliers, or otherwise known as "indirect exporters."

Chua explained that TRAIN bill, which is included in the House Bill No. 5636, explicitly states that the zero-rated VAT privilege of indirect reporters will be removed only "if and when a credible and enhanced system is put in place."

The House of Representatives-approved HB 5635 aims to cut personal income tax rates and lower estate taxes while adjusting fuel and automobile excise taxes, as well as expand the VAT base.

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