The Philippine Economic Zone Authority stands to lose its precious Information Technology-Business Process Management and Business Process Outsourcing locators which provide billions in revenues to the Authority.
This, as the Fiscal Incentives Review Board resolved to allow IT-BPM/BPO firms in economic zones to adopt up to 100 percent work-from-home arrangement and still enjoy tax incentives if IT-BPM/BPO firms transfer registration from PEZA to the Board of Investments.
As agreed at the FIRB meeting last 14 September, IT-BPM/BPO firms can become eligible for increased WFH setup by shifting their registration from the Authority to the BoI, according to Trade Secretary Alfredo Pascual.
"The procedure for transfer of registration from PEZA to BoI will be seamless — to be carried out expeditiously," Pascual, who sits as co-chair of FIRB and chair of both PEZA and BoI, said in a statement on Saturday.
He clarified that IT-BPM firms that will transfer or register with the BoI can retain their physical location within PEZA or in any ecozone, adding that the up to 100 percent WFH scheme would also be available to IT-BPM/BPO firms that will be registered for tax incentives in the future.
The agreed arrangement was one of the options presented by the Department of Trade and Industry to the FIRB, which is chaired by Finance Secretary Benjamin Diokno.
In recognition of the IT-BPM/BPO sector's contributions to jobs generation and foreign revenues to the country, Secretary Pascual said, "From the beginning, our priority has been to secure a solution for the sector's WFH setup, which has become the new normal post-pandemic."
He said registered firms must signify with PEZA their intention to shift registration to the BoI.
"PEZA will then endorse the request to the BoI for the issuance of a Certificate of Registration, which will indicate the remaining incentives. PEZA shall administer the incentives and continue monitoring the transferee firms' compliance," Pascual said.
In May 2022, then deputy director general, now PEZA-OIC director general, Tereso Panga contradicted the idea that PEZA locators would continue to enjoy incentives if they transfer registration from PEZA to the BoI as he said that registered business enterprises have existing contracts with PEZA.
But on Saturday, Panga said PEZA was still waiting for the resolution or guidelines for the said transfer scheme.
"I was told we will be kept whole and that it's only an interim arrangement to preserve the incentives of the IT locators while availing of WFH in their designated IT centers. A more permanent solution is the proposed bill that will allow the PEZA IT locators to avail of WFH with incentives that will put them on an equal footing with the BoI registered business enterprises and follow the lead of India to make the Philippines more attractive, especially to global ICT investors," he said.
Prior to the development, Panga said a total of 478 RBEs were issued letters of authority to implement the 70/30 WFH arrangement, with 225,038 Filipino employees doing WFH, and accounting for a cumulative total investment of P825.819 billion.
Their combined export sales from January-July 2022, meanwhile, amounted to $15.242 Billion or a monthly average of $5.729 Million per RBE, equivalent to P320.264 million per month per RBE.
Meanwhile, IT-BPM Association of the Philippines president Jack Madrid hailed the decision of the FIRB.
"IBPAP enthusiastically welcomes this FIRB resolution and thanks DTI for advocating the WFH scheme as a new business reality, and the FIRB for approving the recommendation. The association and its members vow to work even more closely with the government in bring-in more BPO investments, particularly in the higher value-added segments," Madrid said.
Also, Albay Representative Joey Salceda said, "If they are registered with the BoI instead of PEZA, we get rid of the problem of not being allowed to do work-from-home arrangements," Salceda said, adding that the spirit of the CREATE Law, which sets the tax incentives policy of the country, is to encourage countryside investments and productivity.
He said that WFH allows call center agents to work in the countryside without bearing Manila costs which helps the labor competitiveness and creates demand in the country.
Given that the cost of living in the National Capital Region is among the highest in Asia, the veteran solon said that if they insist on having BPOs work in the metro, there should be an increase in wages at the expense of competitiveness as an investment destination for BPOs.
"So, I see this as a win-win solution. BPOs get to keep their tax perks under the BoI, which has more performance-based incentives than PEZA, so that the latter can focus on manufacturing such as that which involves the electronics sector," he said.
Salceda further explained that the shift towards BoI would also eventually eliminate the practice of having floors or buildings classified as PEZA zones, which causes plenty of tax leakages. Therefore, ecozones will eventually be manufacturing zones that benefit from the ease of trade, he said.