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PEZA appeal to exclude IT-BPM firms from WFH rules denied

  • The Fiscal Incentives Review Board denied the request of the Philippine Economic Zone Authority to exempt IT-business process management (IT-BPM) companies from implementation of the Board’s new work-from-home guidelines
  • Trade Secretary and FIRB vice-chair Ramon Lopez said the IT-BPM sector was consulted even prior to its August 2021 meeting that adopted FIRB Resolution 19-21
  • Finance Secretary and FIRB chairperson Carlos Dominguez III said PEZA’s proposal was inconsistent with government’s emerging economic strategy to gradually reopen the economy

The Fiscal Incentives Review Board (FIRB) denied the request of the Philippine Economic Zone Authority (PEZA) to exempt information technology-business process management (IT-BPM) companies from implementation of the Board’s new work-from-home (WFH) guidelines.

The FIRB Board in its October 15 meeting maintained the implementation of FIRB Resolution No. 19-21, which allows registered business enterprises (RBEs) of the IT-BPM sector to continue implementing WFH arrangements until March 31, 2022 without adversely affecting their fiscal incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Under the Resolution, up to 90% of the RBE’s total workforce may work from home because of the pandemic, subject to conditions provided by the FIRB.

During the meeting, Trade and Industry Secretary and PEZA Board Chairman Ramon Lopez, who is also vice-chair of the FIRB, noted that at the onset of the pandemic, the IT-BPM sector was among the first few industries to successfully put in place systems and mechanisms that effectively allowed its workers to adopt full WFH arrangements.

“The IT-BPM sector was consulted even prior to its August 2021 meeting where Resolution 19-21 was adopted noting that the IT-BPM sector is one of the key employment generators in the country and that the adoption of WFH arrangements has contributed to the creation and preservation of jobs during the pandemic,” Lopez added.

Enterprises exceeding the 90% threshold cannot enjoy income tax incentives during the months of their non-compliance with the FIRB resolution.

PEZA Director-General Charito Plaza had previously appealed to the FIRB to back the request of IT-BPM locators to reconsider maintaining the WFH arrangement PEZA implemented at the beginning of the pandemic under Memorandum Circular (MC) No. 2020-011 dated March 5, 2020. The MC was further extended under various MCs until September 12, 2021.

READ: PEZA wants IT-BPO sector exempt from new WFH guidelines

Under the PEZA directives, registered IT enterprises were allowed to engage in WFH operations up to 90% of their total revenues.

Plaza said FIRB Resolution 19-21 essentially means that IT-BPM companies should maintain at least 10% of their total employees onsite.

She said the appeal of IT enterprises is anchored on the threat posed by the highly contagious COVID-19 Delta variant, and that FIRB Resolution 19-21 defeats the purpose of extending the WFH arrangement, which is to limit the mobility of workers and lessen the pressure on public transport.

PEZA also appealed to the FIRB to reinstate the basis of the threshold of the WFH arrangement to gross revenue, instead of to the total workforce, as a temporary measure available to IT enterprises. This is to support the companies’ recovery and protect their employees from the risk of contracting COVID-19 in the workplace.

Likewise, the IT & Business Process Association of the Philippines (IBPAP) said the clarification on the threshold is “a fair treatment considering that any breach that might happen would only be due to compelling circumstances such as putting the health and safety of employees as more paramount.

“In light of the recent surges in COVID cases, our member companies are heeding the call of the national government to place as many of their employees under WFH as possible so as not to expose them to the risk of catching COVID-19 when going out to work.”

Finance Secretary and FIRB chairperson Carlos Dominguez III, however, emphasized that PEZA’s proposal is not consistent with the emerging economic strategy of the government to gradually and safely reopen the economy.

“The idea of opening the economy is allowing the people to go out and spend money in the restaurants and other businesses in the area. This (proposal) won’t achieve the goal of opening the economy,” he added.

Dominguez also reminded the members of the FIRB that the activities registered with PEZA, which is an economic zone authority, are supposed to be conducted within the economic zones.

Finance Assistant Secretary and FIRB Secretariat head Juvy Danofrata said the 90% WFH arrangement is only a temporary measure for exceptional circumstances approved by the FIRB, as authorized by the implementing rules and regulations of CREATE Act.

Danofrata added that “the PEZA rule that 90% of total revenue from the registered activity is entitled to incentives—revenue, rather than workforce, as basis for the 90%— has no reasonable connection to COVID-19 prevention and mitigation.”

The FIRB also approved, in its October 15 meeting, the penalties to be imposed on IT-BPM registered business enterprises that exceed the 90% threshold of the workforce allowed to work from home.

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