Everest exec says Scrapping investors’ perks not a wise idea

CEBU, Philippines — The Philippines needs to maintain an investor-friendly environment if it wants to retain existing investors and attract new ones, said an executive of American consulting and research firm Everest Group.

Everest Group top executive H. Karthik made this statement amid the controversial Tax Reform Acceleration and Inclusion (Train-2), which aims to “modernize” the tax incentive package for investors.

Karthik said that it is not a wise idea to lessen or scrap any incentive offered by the Philippines specifically to IT/BPO companies which are located in the economic zone areas.

“There is yet no country I know that has stopped giving incentives or reduced them especially that these incentives will be beneficial in the long run,” Karthik said.

The Business Process Outsourcing industry in particular, it should be given utmost attention considering how much it has contributed to the Philippine economy for the past 10 years. The BPO sector is expected to sustain an upswing growth track in the long term.

Unlike other industries like manufacturing, even retail, growth had been erratic or inconsistent.

Based on latest data from Everest Group, the Philippines is seen to account for 16 percent to 18 percent of the aggregate outsourced services globally in 2017.

Financial-wise, the Texas-based research company also revealed that the revenue generated by the local call center sector reached US$13 billion in 2017. This is projected to grow this year by 7 percent to 9 percent.

“Everybody is competing to garner the attention of investors,” Karthik stressed implying that it is not wise for the Philippines to change the rules in the middle of the game.

Across the world, Everest Group has seen countries gaining interest in IT/BPO sector.  “Governments [around the world] even invest in this sector.”

TRAIN-2 seeks to rationalize fiscal incentives and reduce corporate income tax rates gradually to no less than 25 percent from 30 percent.

This provision of the pending tax reform policy alarmed the outsourcing and IT industries, and if not re-considered, the country should prepare for strong headwinds.

Already, the Contact Center Association of the Philippines (CCAP) is asking the government to retain the investment packages stressing that if TRAIN-2  scraps investors’ fiscal perks, it could endanger thousands of jobs.

Everest Group is a Dallas, Texas management consulting and research firm that advises clients on global services issues.