By Genalyn D. Kabiling
President Duterte is not inclined to restore the tax breaks for multinational headquarters in the country despite appeals from foreign chambers of commerce.
Presidential Spokesman Harry Roque maintained that the removal of such tax incentives was in line with the President’s implementation of a fair tax system.
“The President wants fairness in our tax system, particularly for individuals performing similar work,” Roque said during a press conference in Camarines Sur.
The Tax Reform for Acceleration and Inclusion (TRAIN) bill originally granted a preferential tax rate of 15 percent on the gross income for high-earning workers in regional headquarters of multinational companies in the country.
The President, however, vetoed such provision when he signed into law the tax reform measure. He said the provision not only violated the equal protection clause of the Constitution but also the rule of equity and uniformity in the application of the burden of taxation.
“President Duterte’s veto message strongly disagrees with the current system that offers a reduced tax rate for qualified employees of Regional Headquarters and Regional Operating Headquarters (ROHQs), among others. To distinguish them from other similarly hard-working employees is in violation of the Equal Protection Clause of the Constitution,” Roque said.
“To further qualify present employees from future employees of ROHQ/OBU (offshore banking units)/Petroleum Service Contractor/Subcontractor is even more in violation of the clause,” he said.
Roque pointed out that those enjoying the preferential rate are mostly managerial employees and their superiors, including presidents and chief executive officers.
Rank and file employees in the same company, on the other hand, do not enjoy the same lower tax rate, according to Roque.
“President Duterte’s veto ensures that taxpayers are treated alike, and high-ranking and highly paid employees in a company are taxed appropriately as others,” he said.
Roque made the remarks following the appeal of foreign chambers of commerce to retain the tax perks for the regional headquarters. Some business groups reportedly warned of closure of some regional headquarters and loss of jobs following the removal of tax incentives.
The Bureau of Internal Revenue recently issued a tax advisory that employees in regional headquarters of multinational firms are now subject to regular income tax rates.