IT-BPM sector predicts CITIRA to slash growth by about 50%

The Philippine information technology-business process management (IT-BPM) sector on Tuesday said industry growth could be halved should lawmakers pass phase two of the comprehensive tax reform program in its current form.

The sector is going to get hurt badly if the Corporate Income Tax and Incentive Rationalization Act (CITIRA) is passed into law as it is now, the Information Technology and Business Process Association of the Philippines (IBPAP) said in a press conference.

“We are looking at 40%, 50% reduction ng growth ... Whatever that growth trajectory is, it stands to be diminished by close to half,” IBPAP president and CEO Rey Untal told reporters in Taguig City.

The CITIRA bill, formerly the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO), seeks to reduce the corporate income tax (CIT) rates to 20% from 30%.

It also aims to make tax perks time-bound, transparent, targeted, and performance-based for a more competitive fiscal incentives system.

As proposed by the Department of Finance (DOF), some 123 laws will be repealed and consolidated into one omnibus incentive code.

Once CITRA is enacted, it will remove the perpetual tax perks on several industries. Companies paying only 5% on the gross income earned (GIE) will only get to enjoy that incentive for a maximum of five years.

This means that companies will fall under the 30% CIT category

Untal said mean that companied would have to absorb up to 170% increase in settling the tax on gross income earned.

“The range we have looked at, including inputs from other companies that have done their calculations, the cost difference is a difference of about 130% to 170% from where it is now,” he explained.

The IBPAP is proposing that instead of removing the 5% GIE and converting this to the CIT, the government should instead look at increasing the GIE to 7%, Untal noted.

“There are different opinions whether CIT is best, or GIE is better. We maintain that the GIE model is something we are all familiar with, not just as an industry,” Untal said.

“This is a consistent compromise that many other industries have started to get behind,” he elaborated.

The IT-BPM sector is willing to convert to the CIT as long as it gets a 10-year sunset period.

“For those that are already in the 5% regime, we graduate for example to a 7% regime, taking effect on year one, with a 10-year sunset,” he said.

“After 10 years, whatever regime is in place, we go into that. Most likely we will be at least in the 20% CIT anyway, and this will allow us room to recover costs that we have incurred,” Untal added. —VDS, GMA News