IBPAP stands ground on hybrid work setup

The IT and Business Process Association of the Philippines (IBPAP) insists on allowing member companies to implement hybrid work arrangement saying the Letter of Authority (LOAs) issued by the Philippine Economic Zone Authority (PEZA) is legal and fair.

IBPAP President and CEO Jack Madrid made this statement following the Bureau of Internal Revenue’s( BIR) move creating a task force to monitor the compliance of IT-BPM (Information Technology-Business Process Management) on the return-to-work order.

According to Madrid IBPAP stands by the validity of the LOAs issued by Peza to its companies, as well as the member companies of its six partner associations.

In a statement, Madrid said the support of the PEZA allowing 30 percent work-fromhome arrangement through an LOA “is a legal and fair measure that IT-BPM registered business enterprises (RBEs) are grateful for.

Madrid explained that the LOA provides necessary relief to address the cost and competitiveness pressures that the IT-BPM industry has been under since the onset of the pandemic in early 2020.

“The expiration of the 90 percent work-from-home (WFH) arrangement last March 30 has posed great challenges for many registered business enterprises (RBEs) of the IT-BPM industry. These include the complex process on the logistics of mobilizing employees and equipment to onsite operations while managing employee satisfaction and mitigating widespread attrition,” he noted.

LOA gives affected organizations more “flexibility and runway time to transition and set up their offices for returning employees as they strengthen their immediate-term strategies amid continuing global shifts.”

Madrid reiterated that the industry continues to count on the government’s support to uphold the validity of the LOAs “in order to achieve our jobs and revenue targets.

He added that in last two years, the ITBPM industry successfully navigated the pandemic, recording growth in revenues and jobs through the support of PEZA, FIRB, and other government partners.

The Department of Finance (DOF) however stressed its position that PEZA-registered firms have to return to their approved location in an economic zone or lose their tax incentives.

Already, the Bureau of Internal Revenue (BIR) is monitoring the compliance of outsourcing companies in economic zones with the onsite work policy of the Fiscal Incentives Review Board (FIRB).

A BIR task force has been created to ensure that RBEs in the IT-BPM sector currently enjoying tax incentives are complying with the requirement under the law, the DOF said.

In a report, BIR Deputy Commissioner Arnel Guballa, the bureau has issued mission orders allowing the conduct of ocular inspections of the place of business of RBEs, to determine if they are complying with the conditions for the grant of incentives.

ITBPM firms were temporarily allowed by the FIRB to resort to “workfrom-home” arrangements without losing incentives granted to them as ecozone locators so they could continue doing business offsite at the height of the pandemic. The WFH arrangements for RBEs were allowed up to March 31, 2022.

Under Section 309 of the National Internal Revenue Code (NIRC) of 1997, as amended, RBEs and/or registered activities must be conducted within the geographical boundaries of the ecozone or freeport where they are located to be entitled to fiscal incentives.

Earlier, Finance Secretary Carlos G. Dominguez III, who is also FIRB chairman, earlier clarified that RBEs in the IT-BPM sector are free to adopt WFH arrangements beyond the March 31 deadline, noting it is a “corporate management discretion.” “No one is prohibiting them or impinging on their management prerogative to continue implementing their WFH setups.

However, they must give up the tax incentives they currently enjoy because the law is clear on this,” Dominguez said.

Meanwhile, PEZA Director-General Charito B. Plaza warned that the plan to inspect economic zone locators for compliance with the government’s on-site work order could inject an element of uncertainty among investors in the IT-BPM) industry.

According to Plaza, the BIR surprise inspections are creating uncertainty and frustration, “especially that we’re still awaiting the response of the Fiscal Incentives Review Board (FIRB) on PEZA’s appeal for a status quo on the work-fromhome (WFH) arrangements.”

Earlier, Madrid appealed to the government to create legislations to support the new working dynamics under the new normal era, particularly on the work-fromanywhere arrangements.

Madrid said remote working or the work-from-anywhere concept is here to stay and that the Philippines should craft legislations and policies on this new work-style, otherwise the country’s edge in outsourcing may be snatched by country-competitors.

Madrid cited the quick action of other country counterparts such as Malaysia, Poland and India to adjust their laws and regulations on labor, which include already the work flexibility arrangements.