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Investing in Outsourcing for Foreigners

Posted on August 18, 2016

About 70 percent of the information technology-business process outsourcing (IT-BPO) business in the Philippines accounts to the Contact Center Association of the Philippines (CCAP). Out of the 1.2 million workers in the IT-BPO industry, 800,000 are employed by CCAP. To ensure the country’s reputation as the preferred outsourcing destination, CCAP wants status quo on the incentives granted to the industry.

The 11th International Contact Center Conference and Expo (ICCCE) will be held next month with participants that are representative of international outsourcing firms. To entice foreign investors to explore business opportunities in the country, CCAP wants clear directions from the government.

The 11th ICCCE will be having a theme of “Contact Islands: Opportunities in the Ultimate Customer Experience Paradise”. This event will give a chance to potential clients and investors to get firsthand learning experience from industry experts and leaders, meet with potential business partners and enablers, associate with industry peers, and witness live operations with business tours.

President of CCAP and chairman of the Information Technology and Business Processing Association of the Philippines (IBPAP), Benedict Hernandez stated that the reconstruction in corporate income tax and consistent review of the current incentive regime would affect the industry. Currently, the IT-BPO industry enjoys a preferential tax rate of 5 percent on gross income earned if a firm is registered with the Philippine Economic Zone Authority (PEZA).

Since government officials such as the Department of Finance wants to find additional revenues, the CCAP and IBPAP want to have closer discussions with them with regards on lowering both corporate and income tax rates.

Hernandez emphasizes that a comparative study between a low 25 percent income tax rate on net income, and the current PEZA-registered BPOs income tax rate.

Hernandez reiterated that taxation is a factor that global companies consider when choosing sites. Currently, Philippines has an advantage regarding with this.

Malaysia has been strengthening their outsourcing industry by providing free space to outsourcing firms. Compared to Malaysia, Philippines’ incentive package for the IT-BPM industry is less inviting.

From a 100 percent market from the United States, it has decreased to 70 percent. This indicates that the contact center industry has been less dependent on US as a source of clients and investments.

Hernandez said that the fastest growing market for the Philippine call center industry is Australia. Another strong market is Europe. Recently, Hong Kong and Singapore companies outsource some jobs in the Philippines.

This year, the IT-BPM industry projects to hit $16 billion revenues.



Status quo perks sought by BPO’s,