BPOs use tax perks for profits, not for sustaining viability – FIRB

MANILA, Philippines — The government said business process outsourcing (BPO) firms are milking their tax privileges not to sustain their operational viability, but to increase their  profits.

Finance Assistant Secretary Juvy Danofrata said BPOs should consider waiving their fiscal incentives to reduce the government’s cost in sustaining investment activities.

“By giving up their incentives, the opportunity cost to the government of these incentives will be minimized, which will then make us more efficient in utilizing the government’s resources critical in our ongoing economic recovery efforts,” Danofrata said.

Danofrata, who also heads the Cabinet-level Fiscal Incentives Review Board (FIRB) secretariat, said the agency’s latest assessment showed that total dividends reported by BPOs surpassed the value of their tax perks.

According to FIRB, BPOs are exploiting the incentives to push shareholder returns up.

“This suggests that the tax benefits received by BPO firms are not that necessary, as these only increase their profitability,” Danofrata said.

The DOF official reminded locators, especially BPOs, that the grant of incentives come with a set of rules that they need to adhere to, including the provision that they have to operate within an economic zone as mandated by the law.

Danofrata said the FIRB respects the decision of BPO giant Concentrix to maintain its work from home (WFH) setup at the expense of its tax cuts.

The FIRB had permitted BPOs to observe a WFH arrangement at the height of the pandemic to protect workers against the threat of the virus. Also, they were allowed to retain their incentives in spite of moving out of economic zones.

However, the FIRB ordered BPOs to return to office by March 31, a deadline that industry players contested on uncertainties from the COVID-19 pandemic.

The Philippine Economic Zone Authority also requested the FIRB to extend the WFH option until the expiry of the state of calamity due to COVID-19 on Sept. 12 this year.

Concentrix opted to give up its incentives to provide about 100,000 employees the choice to work from home even beyond the government deadline.

Danofrata said Concentrix’s decision to surrender its tax perks strengthens the FIRB’s findings that BPOs can survive even without taking any benefits from the government.