Batuhan: BPO Phenomenon (conclusion)

Allan S.B. Batuhan

Foreign Exchange

FIGHTING cocks in exchange for allowing your business to set up in their municipality may seem like a fair trade to some city council members in certain cities, but is certainly a source of great annoyance to potential investors in the country who are here to start a genuine business, provide employment and improve the national economy in the process.

Many of our so-called leaders and government officials fail to see that the short-sightedness of their actions harms the long-term term viability of the Philippines as a business destination. This is no different from the attitude of our public vehicle drivers and some in the tourist trade, which we have written about before. Instead of trying to cultivate good relationships with visitors so they keep coming back for more, they fleece them and practically rob them of their money the first time around, so they never ever have to think about coming back. No way to treat a customer, right?

Apart from the obvious advantages of the Philippines as a BPO destination, the other important draw that brings investors here are the incentives we offer to potential locators.

The Philippine Economic Zone Authority (Peza) is a very critical lynchpin in this effort, as it is through this agency that a significant number of the investment incentives are administered. And as we have said many times before, Peza as an agency cannot be commended enough for the sterling job that it has done, and continues to do for the investment community.

The problem is that Peza, on its own, cannot do the job without the aid of the other agencies in government that investors also have to deal with. And herein lies the problem.

Our government agencies don’t talk. Nobody is interested in what the others are doing. It’s as if they all exist in a world of their own.

Take for example the VAT zero-rating of companies that are registered with Peza. Some of these companies, although zero-rated, will have incurred some form of input VAT payment, if for instance they were doing some set-up work before their Peza registration was approved. Since many of these companies are “exporters,” in that their customers will be from overseas, they will not be able to pass on the input VAT that they will have paid.

In theory, these companies are entitled to claim their input VAT paid from the BIR. But theory is far simpler than practice.

Just try asking any company, or any tax expert for that matter, on just how “easy” it is to try to claim back input VAT from the BIR. Ever heard of impossible? Try something more difficult than that!

The next president surely has his work cut out for him, to try to make us the BPO destination of choice over India, Eastern Europe or indeed China, which seems to be emerging as the next BPO boom location.

First on the list of things to improve will be the agencies that have touchpoints with BPO locators. The BIR is first on that list. As long as they take a very narrow view on tax issues, and make it difficult for investors to realise the full extent of their investment incentives, they will feel cheated, and come away thinking they were duped. Once bitten, twice shy, as they say.

And of course, although they may be under the radar most of the time, municipal governments will have to get their act together as well. The fighting cock story of one of my BPO contacts is something that cannot be allowed to continue.

Local governments should not be allowed to railroad the good efforts that the national government is trying very hard to implement.

So Mr. incoming President, are you ready for the challenge?

Wishing all our readers and friends a happy Fiesta Senor celebration. Pit Senyor!

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