Filipino employers said registered business enterprises (RBEs) of the Philippine Economic Zone Authority (PEZA) should follow the law governing the availment of tax incentives amid pronouncement by the IT Business Process Association of the Philippines (IBPAP) that removing tax incentives of PEZA firms that continue to operate on hybrid work arrangement could imperil the industry’s goal to generate 1.1 new jobs over the next six years.

The Employers Confederation of the Philippines (ECOP) explained that if the law says that PEZA RBEs are required to operate inside their approved economic zone location as basis for their grant of tax incentives, then they should follow the law.

ECOP President Sergio Ortiz Luis, Jr. said, “I am not saying to remove the incentives for those who opt to operate work-from-home (WFH), but if the rules say so then follow it and be ready to give up the incentives. If you want to enjoy the incentives, then work onsite.”

“There is a law to follow and if the interpretation is wrong then go to the court, not in the court of public opinion,” Ortiz-Luis added.

During the pandemic or until March this year, PEZA RBEs were allowed to operate 90 percent WFH and 10 percent onsite. The Fiscal Incentives Review Board (FIRB), which is chaired by the Department of Finance (DOF), agreed to the extension of a 70-30 (onsite-WFH) arrangement for PEZA IT business process outsourcing firms until Sept. 12 this year only.

PEZA is still pushing for the extension of the 70-30 hybrid work arrangement until March next year and the institutionalization of this scheme, but the DOF has maintained its position that PEZA locators will lose their tax incentives if they do not operate 100 percent onsite stating the hybrid work has “no legal basis.”

PEZA, however, said they have been allowing hybrid work arrangement long before the pandemic, allowing their RBEs to operate 30 percent WFH and 70 percent onsite, citing legal basis such as the Telecommuting Act.

Meantime, the IBPAP has urged FIRB and other government agencies to resolve the issue internally so as not to give the impression to investors of an unstable policy environment, which affects the country’s image.

“If this continues, IT-BPM’s potential to provide 1.1 million new jobs by 2028 will be seriously imperiled,” said IBPAP President and CEO Jack Madrid.

Madrid noted that IBPAP’s push to have WFH/hybrid work arrangements goes beyond business continuity plans (BCPs) related to the COVID-19 pandemic. This is more to adapt to global work trends for business flexibility that investors look for and to strengthen our country’s competitiveness in retaining existing and attracting new IT-BPM investors.

This has been explained to our partners in government, including leaders of key Executive Departments and some Senators, and we believe we have been well-understood and supported. The fact that there is a clamor for and an overwhelming preference for WFH/hybrid work expressed by employees due to many other justifiable reasons that also have gained tremendous public attention should make government’s decision to consider allowing said work setup even more compelling.

With that, Madrid said that the FIRB’s dismissal of the collective wisdom of all these parties, who are advocating continued WFH/hybrid work beyond BCP and the pandemic, by citing that it has no legal basis by virtue of the CREATE Law, is “short-sighted and inconsistent” with the objective of attracting and retaining investors in the country’s biggest job-generating industry and contributor of foreign exchange revenue.

“The long-standing impasse with the FIRB and its very public exchanges with PEZA on the matter of WFH/hybrid work are not only detrimental to our narrative of industry agility, innovation and resilience, but also to our positioning of the Philippines as the IT-BPM investment destination of choice. It has therefore detracted us from what’s truly important—creating more employment and generating more foreign exchange revenue for the country. This has been a recurring problem that has negatively impacted the ease of doing business in the country, as well as the confidence level of our principals and potential clients,” said Madrid.

According to Madrid, the least FIRB could do is to explore all possible means by which it can support the continued growth of the industry with all its contribution to the retention and creation of jobs, the generation of significant forex revenue in the two years of the pandemic, including how the industry fuels the recovery and growth of other major industries.

IBPAP also echoed the call of Sen. Grace Poe for the government to “think outside the cubicle” to prevent excessive bureaucracy from choking out innovation and damaging the image of the Philippines as a progressive and viable investment location.

“With what is at stake and given the resounding support from many of our legislators in Congress and from the heads of several Executive Agencies, the continuing ‘no legal basis’ hardline stance of the FIRB and the penalizing of investors and IT-BPM companies for implementing WFH/hybrid work arrangements is perplexing to us,” IBPAP said.

IBPAP stands by the PEZA and its power to enable hybrid work for its RBEs. “This long-standing policy is irrefutable legal basis for the continuance of the 30 percent work-from-home (WFH) arrangement for IT-BPM companies and the provisions of the PEZA law, which grant the agency authority to oversee the operations of its RBEs, have not been amended based on the opinion of PEZA and other lawyers.

Meanwhile, ECOP also opposed a bill filed in Congress seeking the grant of incentives to employees who are working from home (WFH) saying this would be unfair to those who report for onsite work and would also result in additional cost to employers.

Ortiz-Luis said the bill filed by a Party List Representative would disrupt payment structure of companies when passed.

“Why are you giving incentives to WFH people who are in a much better position than those working onsite. WFH employers have the advantage to those working onsite as they are not subjected to traffic, no need to wake up early, not spend for transportation, and can spend more time with family,” he said.

The bill, he said, calls for incentives to WFH workers to cover for cost of electricity, among others.

In fact, he said, employers are just giving some consideration to those workers whose function can be done remotely. While the WFH employees only account for a small number of workers of an organization, ECOP warns this is still additional cost to employers and can potentially lead to terminating the position rather than preserving.