The Fiscal Incentives Review Board (FIRB) welcomed the decision of Concentrix, a major business process outsourcing (BPO) firm, to give up its tax perks in exchange for a continued hybrid work setup for its employees.
Finance Assistant Secretary and FIRB Secretariat Juvy Danofrata said Concentrix’s decision has validated the Department of Finance’s (DOF) position that tax perks are not that important to investors doing business in the Philippines.
“We support the decision of Concentrix to carry on with its flexible work arrangements. We respect that they are supportive of their employees who want such a work setup in this post-pandemic situation,” Danofrata said in a statement.
“This validates the DOF’s policy thrust to avoid the grant of unnecessary tax incentives as this is apparently not the main consideration for them to do business in the country, especially for the BPO firms that have been enjoying the exemptions and incentives for a long time,” she added.
Danofrata said, “By giving up their incentives, the opportunity cost to the government of these incentives will be minimized, which will make us more efficient in utilizing the government’s resources critical in our ongoing economic recovery efforts.”
Based on the FIRB Secretariat’s assessment, total dividends declared by BPOs exceeded their income tax incentives, signaling that tax incentives are being used to augment shareholder returns.
This suggests that the tax benefits received by BPO firms are not that necessary as these only increase their profitability, she said.
Although advantageous to registered business enterprises (RBEs), Danofrata said the grant of fiscal incentives from the government always comes with a responsibility.
Locators inside special economic zones (SEZs) are accorded tax incentives with the objectives of promoting the flow of investments into the areas where these SEZs are located, generating employment opportunities, and creating backward and forward linkages among industries in and around the economic zones.
“Thus, allowing RBEs in the ecozone or freeport to conduct its business outside the economic zones will effectively render the objectives of establishing economic zones useless as there will be no need for them to locate inside the zones,” Danofrata said.
Concentrix decided to maintain its hybrid work system after the expiration of the FIRB Resolution 19-21 allowing work-from-home arrangement of up to 90 percent of the total workforce of RBEs in the IT-BPM sector last 31 March 2022.