A Death Knell For Philippine Call Centers

In his first ever address to the joint session of Congress, President Obama declared that U.S. firms

outsourcing jobs overseas will no longer enjoy tax breaks. Even at the height of the presidential campaign, Obama has repeatedly made mention of this. But up to now, the Philippine authorities are shrugging off the warnings. Just recently, the Philippine president (purportedly an expert economist herself) declared that BPO's will even grow by 40% this year.  Yeahhh, right!

Just a few days ago, Accenture, one of the largest American based BPO company operating in the Philippines announced it will be laying off 500 employees. Local industry leaders, lap dogs of the current administration were quick to point out that this is merely an isolated case and that the current global financial crisis will not affect the BPO industry in the Philippines.Their simpleton argument goes to say that companies in developed countries will continue to outsource functions overseas to save more during a financial crisis.  Yeahhh, right again!

But hey, did you guys know that way back in 2004, the US Congress had allowed a one-year repatriation tax holiday which reduced the 35 per cent tax rate on foreign earnings of American companies to just 5.25 per cent?  In 2005, over 300 billion dollars in offshore funds were brought back and were subject to a 5.25 per cent tax rate instead of the normal 35 per cent rate, which means Uncle Sam missed out on billions in needed tax revenues.What this means is that while it is true that there are no specific tax breaks for off shoring companies, Obama may look at suspending other broader tax deferment strategies such as the above mentioned tax perks currently being enjoyed by such companies as G.E. and Citibank who have outsourced some of their functions overseas..

Local BPO industry leaders must stop dreaming and brace for a worst case scenario.  They are supposed to be the industry experts and therefore should be the first to enlighten their president about the real future prospects of the call center industry in the Philippines.

Do not ignore these headlines (the exodus to secure tax break covers may have already started!) 

United Airlines has announced it will bring 165 customer-service jobs back to the United States from India and Mexico. That work will be handled at its giant call centers outside Chicago and Honolulu, reports The Chicago Tribune.

Those jobs had been moved offshore about three years ago.

Dell has been criticized for using the tax break plan at the same time that it slashed jobs in the U.S. Dell is also closing two Canadian call centres, including one employing 1,200 in Ottawa.

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• Obama walks a fine line in his first address to a joint session of Congress. (slate.com)