By Gia Catimbang
The status of the economy during the first year of President Duterte lacks a ‘silver lining’ in ‘every viewable angle’, Sen. Antonio Trillanes IV said at the recent Kapihan sa Manila Hotel forum last July 3.
“Does the life of the Filipinos improved today compared to last year?”, Trillanes asked.
A staunch critic of the president, Trillanes cited certain negative changes in economic indicators such as the inflation rate which he said spiked to almost 3.5 percent in April from March as a result of increases in electricity and petroleum costs, according to National Economic and Development Authority (NEDA) figures.
“The business process outsourcing (BPO) contracts caused layoffs to call-center agents,” Trillanes said.
The Philippines has a 12.6-percent share in the global BPO market. BPO is one of the growing industries in the country that employs 1.2 million Filipinos.
The future of the local BPO industry is, however, shaky due to US President Donald Trump’s pursuit of enticing offshored jobs back to the United States.
Trillanes said further worsening the situation were the anti-American rhetorics of Mr. Duterte, who implemented radical changes in foreign policy such as his declaring independence from America and shifting to non-traditional allies Russia and China. Trillanes said such statements drove away potential Western investors.
Despite the odds facing the BPO industry during the term of Mr. Duterte, the president assured stakeholders to protect the industry amidst the ‘political noise.’
“Contracts that have been enforced and still existing shall be respected and will continue until their full implementation,” said Information and Communication Technology Secretary Rodolfo Salalima.
“Another impending problem is the Duterte Tax Plan that will apply added tax to basic commodities, causing more difficulty to our countrymen,” Trillanes added.
Back in January, Trillanes opposed the proposed tax plan of the Duterte administration in imposing a P6 per liter tax on diesel and high levies on fuel and cooking gas, calling the supposed implementation a “burden to the Filipino people.”
“This just shows the President’s lack of sympathy to the plight of Filipino people. Instead of stimulating the economy, the Duterte tax plan will greatly diminish the purchasing power of the people thereby worsening the poverty in our country… Definitely, I will do everything in my capacity to oppose this heartless and unreasonable proposal in the Senate,” the senator said in a statement.
The tax plan was intended to increase revenue to raise capital in order to meet the P8 to P9 trillion cost in infrastructure that the Duterte government intended to run throughout its six-year term, according to Budget Secretary Benjamin Diokno.
Other senators were also against the tax plan, including Sen. Leila de Lima who speculated that the tax plan might raise transport fares and consumer goods.
BPO to remain competitive—DOF
The government, however, said the thriving business process outsourcing (BPO) sector will keep its global competitiveness in the export market.
Finance Undersecretary Karl Kendrick Chua said the aim of the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN), the first package of the Duterte administration’s comprehensive tax reform program (CTRP), is to limit the zero-VAT rating to exporters and remove such a preferential treatment similarly accorded to suppliers of exporters, or what are referred to as “indirect exporters.”
“The fear that the Philippine BPO industry will lose its competitiveness because of the proposed tax reform has no basis. Certain industry stakeholders are likely misinterpreting the provisions of the bill,” Chua said. “There is no change in tax policy here for exporters.”
Chua explained that receipts from domestic services are already subject to 12 percent VAT, and will remain so with the proposed tax reform.
“This has already been the case even before we proposed the TRAIN bill,” he said.
“Receipts from foreign services within the SEZs of the Philippine Economic Zone Authority (PEZA) will remain VAT-exempt, as is the case now, because they are outside customs territory by legal fiction, or zero-rated if the exporters are outside the special economic zone, including those that are BOI-registered,” he added.
As for exporters outside SEZs, Chua said, “they are zero-rated on VAT payments and are entitled to get back their VAT payments once they apply for such refunds under the proposed 90-day refund system, while all other taxpayers, including suppliers to exporters will have to pay the VAT.”
However, he clarified that the proposed TRAIN, as outlined under House Bill No. 5636, explicitly provides that the zero-rated VAT privilege of indirect exporters will be removed only “if and when a credible and enhanced system is put in place” that will allow affected companies to get cash refunds of their VAT payments within 90 days after their filing of VAT refund applications with the Bureau of Internal Revenue (BIR).
“The concerns raised by the BPO sector against tax reform appear to be misplaced. They will remain competitive as demand for their services are driven by the high quality of service and talent they offer. The tax policy in the BPO sector will remain the same even after TRAIN,” Chua said.