DoF not worried about impact of removing expatriates’ perks
THE Department of Finance (DoF) said that multinational firms with regional headquarters here are not concerned about highly-skilled foreign workers losing their preferential income tax rates as a result of tax reform.
Finance Undersecretary Antonette C. Tionko said that in the department’s survey of regional operating headquarters (ROHQ), the preferential tax rate was not the firms’ top concern in deciding whether they will locate in the country, but rather the country’s availability of infrastructure.
“Tax one of the lowest ranked items. It wasn’t their top concern. So if we’re worried about ROHQs locating here because of the tax, well it’s not the main driver. It’s always other things like transportation, accessibility to the airport,” Ms. Tionko said during a forum yesterday.
“So if they argue ( firms will not) locate here because of the taxes, I don’t think that’s true,” she added.
The American Chamber of Commerce expressed concern over the removal of the preferential taxes, as it would discourage multinational companies from setting up off ices here.
Aliens employed in an ROHQ currently enjoy a 15% preferential withholding tax rate on compensation income. Removing the special tax treatment would subject the ROHQ workers to regular taxes.
Ms. Tionko said that the withdrawal of preferential rates would address the unequal treatment given to Filipino individuals employed in the same positions and earning the same salary outside an ROHQ.
“Individuals earning higher income get a tax rate of 15%. That compares with employees with the same skills and abilities working in other companies that are paying the regular rate. What we want to do is to have a simplification of the tax system so that workers gave the same rates, as they earn same amounts,” she said.
“Now one might argue that people working in ROHQs are highly technical. But then you also have a lot of those people working in ordinary BPOs ( business process outsourcing firms). In fact, I know for a fact that that 15% rate is being used by ROHQs as recruitment tool,” she added.
She said that the government’s P8.4 trillion infrastructure program, fueled by the additional revenues from the tax reform, should address the concerns of the multinational firms.
“Yes we understand you want to keep these people. If the country does better with all that we’re trying to achieve like better roads, facilities, health care, then they should stay in the country. They won’t stay in the country purely because of the tax, they stay for other reasons,” she added.
Finance Undersecretary Karl Kendrick T. Chua for his part said that the government does not need to go out of its way to retain incentives for foreign workers, given the country’s competitive economy.
“You know when the incentives were given 30 years ago, the Philippines was much weaker, there was no market, and we have nothing to attract investors. Today we have a very strong economy, the tax reform will incentivize more investors to come, we are three times richer than 10 years ago,” he told reporters last week.
“I don’t think they will leave because there are so many other reasons… our economy is at $300 billion… they will have to think many times before they leave,” he added.
The first tax reform package also removes some value-added tax exemptions, increases excise taxes on oil products and automobiles, introduces a sugar excise tax, harmonizes estate and donor’s tax rates, and mandates improved tax administration measures such as the fuel marking scheme, the linkage of point-of-sale machines, and the mandatory issuance of e-receipts. —