Currently the BPO industry is the fastest rising and best performing industry in the Philippines. Despite all its success and achievements, it is not without trouble. While experts still see continuous growth, here are the local and international threats stirring up trouble for the sector
New Taxation Scheme Takes Away Tax Incentive for BPO Companies
The recently approved personal income tax scheme exemption will have a negative impact on the IT-BPO industry. While it’s good news for workers, it doesn’t fare well for BPO companies.
To fill in the void the tax exemption will make, the government is planning to rescind the special VAT exemption for BPO companies. Currently, BPO companies enjoy various incentives. Among these are the exemption of certain sales and imports from the value added tax. The tax reform is set to take these incentives away from BPO companies.
This is significant, as the tax exemption is one of the attractions for BPO companies to invest in the Philippines.
The BPO side of the tax exemption is without resistance. PEZA Chairwoman Charito Plaza is asking for reconsideration. She argues that there is more loss at stake when the Philippines lose foreign investors due to the new tax policy. Losses in investment and employment opportunities looms as unrest and uncertainty clouds the BPO industry.
The government has yet to make a decision regarding this concern as of the writing of this article.
Is Automation the Future of the Global BPO Industry?
BPO companies all over the world are leaning towards automation of processes. An upcoming technology called Robotic Process Automation (RPA), which carries out business processes – especially the menial and repetitive ones, eliminates the need for human workers for simpler business administrative tasks.
The RPA, while still at its early stages, is an attractive investment for BPO companies. Its operating costs are about a third of the Full Time Equivalent (FTE) of a worker in India or the Philippines.
Even though the current RPA is still immature, its value is clearly visible in its early stages.
The current RPA will impact about 20%-40% of the process in today’s BPO industry, but with the pace the technology is developing, the tipping point for the RPA to become the core of the BPO industry is sure to come soon.
What the BPO Industry is doing today.
As for the threats posed by the tax exemption, the local industry is prepared to upscale the value of our services to accommodate the increase in costs. The country is still relatively cheaper compared to other alternatives.
The Information Technology and Business Process Association of the Philippines (IBPAP) Chairman is also acknowledging the threats from automation. They are continuously working on upgrading the skills of Filipino BPO workers to tackle on more complex jobs. The sector is shifting to jobs that are least likely to be affected by the automation under the Knowledge Process Outsourcing sub-sector (KPO).
The coming years will be crucial in determining how the industry will fare. It will be interesting how the Philippine BPO Industry will deal with not only threats but uncertainty that surrounds the high- performing industry’s future.