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Last May 4th PEZA Chairwoman Charito Plaza shared to us a battle which the IT-BPO industry will soon face, the removal of the special tax-exemption for BPO companies.

In the wake of the exemption of withholding tax for workers earning P21, 000 and below, the government plans to fill the tax void that this policy will leave behind by taking away a different tax-exemption, the special 0% VAT for IT-BPO and manufacturing sectors.

The tax-exemption for the IT-BPO sector is a major attraction factor for foreign investors. While a tax exemption maybe too much of an incentive, the industry more than made up for it by creating countless jobs and generating billions in income. Removing this exemption raised three key points that were included in the PEZA Chairwoman’s talk:

  1. Rapidly increasing cost are already putting BPO companies on edge, how worse will the removal of the special incentive affect their situation?
  2. Will the higher take home pay still be worth it for Filipino workers if there would be massive job loss should foreign investors withdraw?
  3. How will the dent in the best performing industry affect the rapidly improving overall economy of the Philippines?

PEZA fought hard to create an economic miracle that is the growth of the IT-BPO industry. Just as the growth is sudden and surprising, the government’s plan might make all the progress that has been made for the industry collapse in a blink of an eye.

Charito Plaza is a PhD holder for Peace & Security Administration. The Harvard alumna is one of the Authors of the Special Economic Zones that created PEZA. With the creation of PEZA, she enabled one of the best economic performances in decades.

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