In the fast-paced realm of the Business Process Outsourcing (BPO) industry in the Philippines, recent developments have stirred concerns within the sector.
The IT and Business Process Association of the Philippines (IBPAP), the vanguard organization of the BPO industry, has raised alarms regarding a recent opinion proffered by the Department of Justice (DOJ). This pronouncement mandates BPO firms within ecozones to operate onsite to maintain their coveted tax incentives.
Unraveling the DOJ Opinion
The crux of the matter revolves around the interpretation of Section 309 of the Tax Code, with specific emphasis on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act or Republic Act No. 11534. Justice Secretary Jesus Crispin C. Remulla, in a legal opinion dated January 3, 2024, underscored the prevailing nature of Section 309. Until a new legislative amendment materializes, businesses within economic or freeport zones are mandated to conduct operations within zone boundaries to continue enjoying tax incentives.
Remulla clarified that while these enterprises are not barred from adopting a work-from-home (WFH) arrangement, such a move would render them ineligible for tax incentives. This has sent ripples of concern throughout the BPO industry, particularly in a landscape grappling with talent supply issues and aiming to surpass the two-million job mark by 2025.
IBPAP's Articulation of Concerns
Jack Madrid, President of IBPAP, expressed apprehensions regarding the impact of the DOJ opinion on potential BPO employees. Madrid highlighted the perceived constraint on work flexibility and its potential to discourage individuals from joining the industry. In a press briefing, he articulated, "When we have a talent supply problem and they read a headline that constrains them from work flexibility, this could damage the reputation of our industry and our country."
The Intersection of Legislation and Industry Growth
Madrid acknowledged the ongoing talent supply challenge and urged a nuanced approach that aligns with the industry's need for flexibility. He emphasized that legislative proposals, particularly the CREATE More (Create to maximize opportunities for reinvigorating the Economy) bill, are under consideration. Madrid sees this legislation as a crucial step in resolving the issue of work flexibility, providing a potential framework for the industry to navigate the evolving landscape.
Industry Dynamics: On-site vs. Remote Work
Discussing the current state of the industry, Madrid noted a gradual return to on-site work over the past two years. While approximately 60 percent of jobs are now conducted on-site, there is a spectrum, with some companies adopting a 90-10 on-site to remote work ratio, while others maintain a more balanced approach. Madrid explained that collaboration requirements vary across the diverse sectors within the BPO domain, emphasizing the need for a nuanced approach to work arrangements.
IBPAP's Optimistic Outlook
Madrid's optimistic outlook on the growth of the IT and Business Process Management (IT-BPM) sector in the Philippines provides a glimpse into the industry's resilience and potential. Despite facing challenges, the sector experienced notable achievements in the previous year. The growth of 8 percent in direct jobs and the generation of over $35 billion in revenue underscored the industry's significance in contributing to the country's economic landscape.
Looking forward, Madrid's projections for the coming year reveal a continued upward trajectory. Anticipating a growth rate of 7 to 8 percent, the industry aims to surpass 1.84 million direct jobs and achieve a revenue milestone of $39 billion in 2024. These projections not only signify sustained economic contributions but also highlight the sector's adaptability in the face of evolving global demands.
The ambitious goal of exceeding two million direct jobs by 2025 reflects the dynamism ingrained in the Philippine BPO industry. This target emphasizes the industry's commitment to not only maintaining but expanding its role as a major provider of global services. Such aspirations showcase the resilience of the workforce and the strategic initiatives in place to bolster the industry's growth.
In conclusion, the convergence of legislative considerations, talent supply challenges, and the industry's commitment to flexibility underscores the multifaceted nature of the current landscape. As the BPO sector charts its course, stakeholders eagerly await the resolution of legislative proposals, particularly the CREATE More bill, which holds the promise of providing clarity and balance to the intricate dance between tax incentives and work arrangements in the Philippines' BPO sector.
