Regulatory reform pushed to protect IT-BPM sector

The IT and Business Process Association of the Philippines (IBPAP), in a Senate hearing last week, raised concerns that may undermine investor confidence in the information technology and business process outsourcing industry.

At the hearing led by Senators Bam Aquino and Risa Hontiveros, officials of the umbrella organization of the IT-BPM industry, namely Celeste Ilagan, chief operating officer of IBPAP, presented the regulatory hurdles hounding their sector.

Regulatory hurdles hounding the IT-BPM industry

These include the continued imposition of local taxes, fees, and charges by some local government units despite CREATE MORE provisions granting exemptions to Registered Business Enterprises; the inconsistent business permitting requirements, including additional local documentation for employees; the Bureau of Internal Revenue Memorandum Circular 05-2024, which, as implemented in some areas, subjects certain cross-border services to 25 percent final withholding tax plus 12 percent VAT, and the large and inconsistent tax assessments that create uncertainty for investors.

Although clarificatory guidance was issued through RMC 38-2024, companies continue to report uneven implementation across Revenue District Offices.

“These concerns are escalated to global headquarters and influence location decisions,” Ilagan said.

IBPAP estimates that regulatory friction and related cost differentials may increase operating costs by 15 to 20 percent compared with competitor markets.

Cybersecurity and legal standing

Further, the IBPAP also called for amendments to the Cybercrime Prevention Act of 2012 to grant IT-BPM firms legal standing to directly file cybercrime cases when fraud affects foreign clients.