IBPAP: BPOs still need tax perks

FAST-GROWING. The IT-BPO industry in the Philippines generates generated $11 billion in revenue last year. INQUIRER file photo

The IT and Business Process Association of the Philippines (IBPAP), whose member-business process outsourcing (BPO) firms earn dollars for the country while generating thousands of new jobs, on Wednesday refuted claims that tax incentives are no longer needed for them to thrive.

Also on Wednesday, the Department of Finance (DOF) said it found it ironic that the Philippine Economic Zone Authority (Peza), an investment promotion agency (IPA) giving away tax perks to qualified investors, supposedly does not know how much investments its locators pour into the country.

Peza is a staunch defender of the BPO industry, which recently reported it already exceeded in 2021 its 2022 targets of 1.43 million workers and $29.1 billion in revenues. Last year, the BPO sector employed 1.44 million and earned $29.5 billion.

In a statement, IBPAP said the information technology and business process management (IT-BPM) industry “values fiscal incentives, which often is the tiebreaker in their investment considerations.”

Last week, the DOF said that the decision of Concentrix—the largest BPO operating in the Philippines—to forego its tax breaks to instead keep many of its agents working-from-home meant that fiscal perks may no longer be a top-of-mind consideration among prospective foreign investors, especially BPOs.

But for IBPAP, “continued profitability is key to retain their investments, expand in the country, create more jobs for Filipinos, and contribute to urban and countryside economic development including the generation of significant export revenue.”

IBPAP said the Philippines, a global leader in IT-BPM services, finds its competitive advantage in the Filipino talent, its expanding digital infrastructure and strong government support that creates an enabling and conducive business environment.

To maintain the country’s global competitiveness, regulatory and investment policies in the country need to be clear and consistent, IBPAP said. “Terms and conditions of investment registrations must be honored and upheld, including the grant of fiscal and non-fiscal incentives. Ease and predictability of doing business is of paramount importance.”

IBPAP president and chief executive Jack Madrid noted that their decision to locate in the Philippines was based on laws, regulations and policies they vetted versus competing locations. “Investors in the IT-BPM industry expect no less,” Madrid said.

As such, IBPAP reiterated its appeal for the Fiscal Incentives Review Board (FIRB) to reconsider its decision and rule in favor of the IT-BPM industry by allowing its players the privilege of fully implementing Peza’s letters of authority on work from home (WFH) setup.

Earlier, Peza said IT-BPO companies and other registered locators can apply for the hybrid work arrangement until Sept. 12, the end of the state of calamity declared by President Duterte due to the COVID-19 pandemic.

IBPAP said the FIRB directive poses a threat to the industry’s growth and remains a big challenge to industry players. “Moreover, a critical risk that industry players face is increased employee attrition if the WFH/hybrid work setup is not available,” the group said.

“Therefore, even at the risk of being meted with penalties imposed by the FIRB on companies who are unable to comply with the return-to-workplace order, some of these registered business enterprises will choose to allow employees to continue working from home,” it added.

Meanwhile, citing a recent report of the FIRB Secretariat, the DOF claimed in a separate statement that Peza was “clueless” as it “does not track the inflow of actual investments made by its registered business enterprises since the implementation of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act to determine if these are commensurate to the value of fiscal incentives that such ecozone locators enjoy each year. The DOF chairs the FIRB, while Peza is an IPA attached to the Department of Trade and Industry (DTI), also an FIRB member.

“Peza submitted incomplete information about the investment capital and market orientation of its locators when it was asked to send data to the FIRB as part of the compliance of IPAs with the provisions of the CREATE Law,” the FIRB Secretariat headed by DOF Assistant Secretary Juvy Danofrata recently reported. Peza Director General Charito Plaza took exception to the statement, stressing that Peza found the FIRB statement “particularly erroneous, misleading and intends to embarrass PEZA as an Investment Promotion Agency.”