Incentives plan to hurt office demand
THE government should not remove tax incentives for the Information Technology and Business Process Management (ITBPM) industry as this would slow demand for office space in the country, according to a real estate consultancy firm.
“[T]here is a chilling message that they (the government) are going to impose VAT (value added tax) on IT-BPMs and that is by repealing the PEZA (Philippine Economic Zone Authority) law. If you are rewriting the PEZA law by imposing VAT, you are not following that law anymore,” Pronove Tai Chief Executive Officer Monique Pronove told The Manila Times in an interview on Wednesday.
“Do not reinvent the wheel. Do not even touch what is working. When you change something that is working, the impact to business is to stop the growth, stop the investment,” she added.
In a presentation, Pronove showed that there were 10 million square meters of office space available in Metro Manila, mainly in the districts of Makati, Taguig and Ortigas. About 9.5 million sq m of this has been taken up, leaving a healthy vacancy rate of 5 percent.
IT-BPM companies account for the majority of office space take-up, followed by traditional businesses and Philippine offshore gaming operations (POGOs).
“[For] the Train (Tax Reform for Acceleration and Inclusion law) 1, the issues then in 2017 were more of was VAT was going to be re-imposed? We found that [some] IT-BPM [firms] did not push through with their expansion plans because of uncertainties,” Pronove said.
Package 2 of the government’s Comprehensive Tax Reform Program, which is currently being deliberated by the House of Representatives, calls for a sweeping review of incentives offered investors along with cuts to corporate income taxes.
The government expects Congress to approve the law later this year and Industry groups and even government officials have warned about the potential impact of investments.
Pronove said that aside from having Filipino workers who are fluent in speaking English, foreign investors want to set up their businesses in the country due to tax incentives.
“That is still a factor why they want [to set up] here,” she said.
Meanwhile, she expects demand for office space in Metro Manila to continue growing despite the government’s push to develop Clark to help decongest Metro Manila.
She added that Muntinlupa was not too developed yet and should be improved so that it could also accommodate more offices to relieve Makati and Taguig.
“The provincial push is mostly back office rather than headquarters. I don’t think it (Manila) would be cannibalized at all. It would remain to be the premier,” Pronove said.
“Metro Manila is huge, you still have a lot of land in Muntinlupa that has not been developed for the past 30 years compared with Fort Bonifacio, which is younger in terms of development yet there are more buildings built in the past 15 years as compared to Filinvest or Muntinlupa.”