Philippine office market could take a hit over tax proposal that could hurt outsourcing and Chinese online gaming firms
- Proposed tax changes come as Malaysia, Indonesia act to make themselves more attractive to outsourcing business, one analyst warns
- Business process outsourcing, Chinese online gaming firms are big property renters in Philippines
Demand for office space in the Philippines from two big job creators – business process outsourcing and Chinese online gaming – could take a hit if a proposed tax change goes into effect and the US-China trade war isn’t resolved.
The Philippine office property market has posted growth for more than a decade and has been mainly supported by the BPO sector – a major generator of jobs and revenue in the country – and, more recently, the online gaming firms from China.
But property consultancy JLL Philippines said the country’s office property market could be undermined if such employers face a different tax structure.
The Philippines is considering changing present tax incentives that grant export-oriented firms – including outsourcing companies – tax holidays of up to eight years, and beyond that, a cap of 5 per cent tax.
Under a proposed tax overhaul, corporate income tax would gradually be reduced from 30 per cent to 25 per cent. However, a tax holiday would be granted based on performance, which might disqualify a number of BPO firms, while the tax cap would be raised to 15 per cent on net taxable income.