BPOs alarmed by aggressive LGU taxation despite exemptions under CREATE MORE

THE IT and Business Process Association of the Philippines (IBPAP) said local government units (LGUs) are insisting on collecting local taxes even though the industry enjoys exemptions under the CREATE MORE Act.

IBPAP said the information technology-business process outsourcing (IT-BPM) industry faces increased operating costs of 15% to 20% if the exemptions are ignored, likely affecting locator decisions.

In a statement on Monday, IBPAP said inconsistent tax policy and permitting requirements are having an impact on potential investment decisions.

“These concerns are escalated to global headquarters and influence location decisions,” IBPAP Chief Operating Officer Celeste B. Ilagan said.

The IBPAP said LGUs are disregarding  the exemptions granted by the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, and are also concerned by inconsistencies in tax assessments.

The IBPAP noted that the Bureau of Internal Revenue’s Memorandum Circular 05-2024, as implemented in some areas, subjects certain cross-border services to a 25% final withholding tax, plus a 12% value-added tax.

It also cited the need to amend Republic Act No. 10175 or the Cybercrime Prevention Act of 2012, particularly to allow IT-BPM firms to directly file cybercrime cases when fraud affects foreign clients.

“Currently, companies may bear financial liability but lack prosecutorial standing, limiting deterrence, and weakening client confidence,” the IBPAP said.

The group also cited the need to reskill IT-BPM workers, as the rapid adoption of artificial intelligence (AI) poses risks to companies offering entry-level and voice-based services.

“If there is no talent, there will be no locators. We need to embed digital capability across the workforce and accelerate industry-aligned training,” Frankie Antolin, IBPAP executive director for Talent Development and Attraction, said.

The group also warned that even modest job losses in provincial hubs could significantly impact those economies.

The IT-BPM industry supports over 250,000 workers in the Visayas and Mindanao.

IBPAP called on the need for the accelerated approval of enterprise-based training, nationwide AI literacy programs, and faster rollout of government reskilling programs.

It also sought targeted support for small and medium enterprises, as well as homegrown business process outsourcing (BPO) firms.

These concerns will be the focus of the IBPAP’s first annual membership meeting for the year scheduled for March 4.

The IBPAP 2026 targets are $42 billion in revenue and staffing levels of 1.97 million. — Beatriz Marie D. Cruz