FLEXIBLE work models and tax incentives will sustain the competitiveness of the information technology and business process management (IT-BPM) industry, keeping their regulation in line with other markets, according to Colliers Philippines, a commercial real estate consultancy.
“Colliers believes that stable fiscal policies, such as work-from-home (WFH) arrangements, must be established for the Philippines to fully (adapt) to global work trends and technological developments and to strengthen our competitiveness in retaining existing and attracting new IT-BPM locators,” it said in a report on Friday.
It added that “the government’s recognition that the flexible models of working are the way forward” can help the Philippine outsourcing industry stay on par with India, Brazil, Malaysia, and the US.
In the report, Colliers said the IT-BPM industry was the biggest driver of employment and foreign exchange revenue growth.
The industry posted a 9.1% increase in full-time employees to 1.44 million and a 10.6% increase in revenue to $29.49 billion in 2021.
“The industry has been a major pillar of the economy as it continued to contribute new employment and export gains during the pandemic,” Colliers said.
The Corporate Recovery and Tax Incentives for Enterprises Act requires that projects registered under Philippine Economic Zone Authority (PEZA) must operate physically within an economic zone to be eligible for tax incentives, a source of friction between the government and the industry, which wants more freedom in determining where employees can work.
During the pandemic, PEZA locators were allowed to maintain a 70% on-site and 30% WFH arrangement until Sept. 12, without losing their tax incentives.
WFH arrangements were later extended until the end of 2022 after President Ferdinand R. Marcos, Jr.’s extended the period of state of calamity due to coronavirus disease in the Presidential Proclamation No. 57 series 2022.
Colliers said that many IT-BPM companies have been looking into transferring their registration from PEZA to the Board of Investments (BoI) to enjoy tax incentives without being bound by location restrictions.
To resolve the sector’s tax incentive issue, the Fiscal Incentives Review Board allowed the transfer of IT-BPM registrations to the BoI.
“This development enables tax incentives to be continued after the transfer of registration from PEZA to BoI,” Colliers said.
“Colliers believes that the continuity of incentives under both PEZA and BoI reaffirms the spirit of CREATE to equalize the incentives across the different investment promotion agencies and to retain tax incentives under a work-from-home or hybrid-work scheme,” it said.
It added that this development minimizes disruptions like additional tax penalties and employee attrition for current locators.
“(This) will allow them to focus on growth plans now that the policy moving forward is certain,” the firm said.
Colliers said: “Sustaining the Philippines’ competitiveness in the IT-BPM landscape by accommodating flexible WFH arrangements will bode well for the country to become a strong investment destination and help the local IT-BPM industry achieve its growth targets.” — Justine Irish D. Tabile