BPO industry association says BIR inspections spooking members

THE inspections being conducted by the Bureau of Internal Revenue (BIR) to verify compliance with government orders to resume on-site work in economic zones has sown confusion within the information technology and business process management (IT-BPM) firms, the industry’s association said.

IT and Business Process Association of the Philippines (IBPAP) President and Chief Executive Officer Jack Madrid said the confusion stems from the letters of authority (LoAs) under which IT-BPM companies, also known as business process outsourcing (BPO) firms, are evaluated. The industry believes the 70% on-site work rule laid down by the Philippine Economic Zone Authority (PEZA) is valid, as against the 90% onsite level required by the Financial Incentives Review Board (FIRB).

“What we are concerned about is the ongoing confusion with some of the inspections,” Mr. Madrid said in a television interview on Wednesday.

The industry is required by tax law to conduct all its work within economic zones, a rule which was relaxed for safety reasons during the pandemic. The relaxed rules allowing more work-from-home (WFH) arrangements expired on March 30.

FIRB Chairman and Finance Secretary Carlos G. Dominguez III has said that economic zone locators may choose to operate on an expanded WFH basis, but must surrender their fiscal incentives.

“Some of the inspections have caught our locators a little bit off-guard because they hold letters of authority which allow 70% (on-site work). Some of the questions posed in some of the reports requested by the inspectors are not consistent with what the LoAs have stated as to (30%) WFH. This has caused some confusion” when locators examine the inspectors’ mission orders, he added. 

Mr. Madrid said hybrid work arrangements in the IT-BPM industry are “more than capable” of delivering services to its customers.

“Overall productivity and customer satisfaction during the pandemic actually improved. Our industry has proven that we are more than capable of delivering the same quality of service to customers around the world… Our industry grew 120,000 new jobs for Filipinos in 2021 alone,” Mr. Madrid said.

“So, I see no better proof of why this hybrid/WFH model works and not to mention also that the IT-BPM industry is one of the large generators of work for Filipinos,” he added.

The BIR had announced the creation of a task force to inspect economic zone locators for compliance with the eligibility requirements for tax incentives — including on-site work — laid down by Republic Act No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

PEZA announced in April that it is permitting 70% on-site work for locators, who had requested the relaxed on-site work rules be extended until Sept. 12, by which time the state of calamity declared during the pandemic will have expired. PEZA has taken the position that it is authorized by CREATE to permit 70% on-site work.

Mr. Madrid said IBPAP is evaluating hybrid work arrangements in light of the ongoing reopening of the economy.

“We are conducting ongoing discussions on what the WFH/hybrid arrangements will look like. I have always appealed for a smooth transition to on-site operations for our members,” Mr. Madrid said.

“What this smooth transition might look like will vary depending on the customers that our Filipino workforce serve,” he added. — Revin Mikhael D. Ochave

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