BPOs 'safe' from tax reform, sugar-sweetened milk under deliberation
MANILA, Philippines – Business process outsourcing (BPO) companies will be safe from the Duterte administration's proposed tax reform package, while the fate of milk products, particularly flavored ones, will still be discussed, according to Finance Secretary Carlos Dominguez III.
"We have made it clear several times to the BPO Industry that the incentives given to them will remain so they should not have any concern about that area," Dominguez said at the 2017 Sulong Pilipinas forum held on Wednesday, August 9.
The BPO industry has been the Philippines' best performer. It is projected to bring in $40 billion in revenues while employing 7.6 million people, both directly and indirectly.
The industry recently expressed fears that key tax incentives relating to value-added tax (VAT) exemptions would be axed as part of the proposed tax reform package.
The House of Representatives already passed its version of the tax reform package – House Bill 5636 – but there could still be major changes in the Senate version – Senate Bill 1408 – which remains under deliberation. If the Senate bill is passed, both versions of the tax reform measure will undergo bicameral reconciliation.
BPO firms currently enjoy VAT exemptions if located in a Special Economic Zone (SEZ) or registered under the Board of Investments. If located outside an SEZ, BPO firms get zero rating on their VAT and can get cash refunds for VAT within 90 days.
Fate of milk unclear
Less clear, however, is which forms of milk will be covered by the provision on sugar-sweetened beverages.
Under the House version, the so-called sugar tax proposes levying a P10 tax on all non-alcoholic beverages that contain sugar or artificial sweeteners.
Earlier this week, the Philippine Chamber of Food Manufacturers Incorporated (PCFMI) released a position paper noting that levying a tax on milk products would increase prices by as much as 30% and worsen an already alarming level of child malnutrition. (READ: Netizens react to proposed tax on sugary drinks)
The proposed tax on milk is likely to increase the prices of powdered milk in the country by a range of 11% to 26%, while flavored milk, specifically those that are chocolate flavored, will see higher prices by a range of 11% to 34%. Such price hikes will bring these basic necessities beyond the reach of consumers, the PCFMI said.
In response, Dominguez said: "Definitely any product that contains sugar will attract a tax and this is a health measure. Too much sugar is not good for people's consumption – that's recognized by everyone."
He added: "We see our bills in PhilHealth, particularly for control of diabetes, and what we want to discourage is excess consumption of sugar. There are some ideas that are floating around on sugar taxation, namely should it be taxed across the board or according to the level of sugar content of a particular product... Definitely we will keep in mind the concern about milk."
Dominguez also clarified that milk products without added sugar will definitely have no tax.
The 2017 Sulong Pilipinas forum was the 2nd major discussion between the country's economic managers and the private sector held by the Duterte administration. The inaugural forum last year yielded the 10-point socioeconomic plan. (READ: Duterte on business sector's 10-point wishlist: 'It's doable')
This year's key recommendations included ensuring the entry of a 3rd telecommunications player, building a C6 road, and finally ending the crisis in Marawi City. – Rappler.com