PH urged to ‘reimagine’ policies, tax breaks for BPOs

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Business process outsourcing (BPO) firms abroad, including those in India, will likely continue to have many of their employees working from home even after the pandemic, a future that will require the Philippines to reimagine its policies and tax breaks or else get left behind, a global research firm said.

But local BPO firms, where 60 percent of employees were working at home by the end of 2021, will have to get their people back in the office this April, as per a government resolution, unless they are willing to lose their tax breaks and make business more expensive.

This is not the direction the rest of the global industry is taking, according to officials of the Everest Group, a research firm that advises top global companies in outsourcing their services. The pandemic has forced the industry to realize the benefits of a hybrid work environment, which had, among others, allowed BPOs to hire workers who otherwise live too far from the office.

“I think the conversation needs to shift to what needs to be done to enable remote working,” Prashray Kala, vice president of Everest Group, told the Inquirer in a zoom interview last week. This, he said, would require a change in policies and tax breaks, not to mention better internet connectivity, so that these would also support BPOs that do hybrid work.

But tax breaks like income tax holidays are currently tied to a physical space. To be eligible, a BPO firm has to have an office space in an economic zone under the Philippine Economic Zone Authority (Peza). Many BPO offices in Metro Manila, for example, are ecozones. While the government allowed BPOs to keep their tax breaks working from home during the pandemic, this is only temporary.

“If you really go through the long list, most of these policies were written at a point of time where nobody really thought people can work from anywhere [except the office]. Most of these policies were [made] 10 to 20 years ago,” he said.

“I think [policies are] where we expect a lot of change to happen in the next two to three years. We expect policies to change globally, not just in the Philippines, to support remote working. If the Philippines does not change its policies and incentives to suit remote working and does not provide the right infrastructure, then we see Philippines risk losing business,” he said. Peza approved P22.23 billion worth of pledges in the BPO industry in 2018, according to the Philippine Statistics Authority data. But in 2019, when President Duterte imposed the ecozone ban in Metro Manila, commitments dropped nearly 21 percent to P17.58 billion. This improved to P18.5 billion in 2020, before suffering a 60-percent drop to P7.32 billion in 2021.

Yet, the IT-BPM industry, the country’s largest private sector employer, added 23,000 new workers to its workforce in 2020, bringing the total to 1.32 million, or a 1.8 percent growth from 2019.

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