Finance Secretary Carlos Dominguez III asked the business process outsourcing industry to level up its services to avoid a plateau in terms of growth.
Dominguez made the statement as investments in the BPO sector fell last year as more customer services became automated and as US President Donald Trump tried to convince American companies to bring back jobs to the mainland.
Data showed the BPO sector grew 3.1 percent in the fourth quarter, slower than 3.8 percent in the third quarter.
“The biggest challenge for the BPO sector is not the tax but artificial intelligence…. That is why they are ‘plateauing’,” Dominguez said.
The Finance Department submitted the second package of tax reforms to Congress which contains proposed changes in tax incentives granted to companies, including BPOs.
Dominguez said BPO incentives should be time-bound. He said some companies were getting tax incentives for the past 40 years.
Economic Planning Secretary Ernesto Pernia said the slowdown in BPO growth could be a sign of the maturing sector which meant it should move to a higher level of skills and value-added services.
“BPO remains a high-performing sector but we are seeing some plateauing… It has reached some steady state,” Pernia said.
Meanwhile, Dominguez said the implementation of tax reforms under the proposed federal form of government would be “very challenging” on the issue of revenue sharing.
“It is very challenging because the tendency for the different federal states would be to retain as much revenue as they can,” Dominguez said, adding that this could result in lower revenues for the national government.
Under the proposed shift, the country will be divided into states that will be formed from the existing regions.
Under the current form of government which is unitary, local government units remit all of their income to the national government and receive an Internal Revenue Allotment amounting to 40 percent of the taxes collected by the Bureau of Internal Revenue.