The Corporate Income Tax and Incentives Rationalization Act (CITIRA) will slow down the growth of the BPO industry, according to the IT and Business Process Association of the Philippines (IBPAP). CITIRA is the second package of the government’s tax reform program aimed at reducing the corporate income tax rate to 20% from the current 30%. However, IBPAP maintained that it will “rationalize” the tax incentives given to select firms, such as those in the BPO sector, resulting in the decline of the sector’s growth by half, as well as severely affecting its ability to create jobs.
According to IBPAP president Rey Untal, they are looking at a 40 to 50% decrease in their ability to generate jobs, adding that CITIRA will cause their tax expenses to go up by 130 to 170% within two to three years, while also causing their service rates to increase and their global competitiveness to diminish. Untal warned that the Philippine BPO sector is already 17% more expensive than India and the bill is expected to increase this price differential. IBPAP also said CITIRA will discourage firms from expanding in the country.