Foreign business groups have asked gov’t to retain workers’ tax perks, Roque says

FOREIGN business groups have asked the government to retain the tax perks of employees of regional headquarters (RHQs) and regional operating headquarters (ROHQs), among others, contained in the tax reform legislation, Presidential Spokesperson Herminio Harry L. Roque, Jr. said.

“There is an appeal of Foreign Chambers of Commerce to retain the tax perks of existing regional headquarters of multinational company[ies],” Mr. Roque said in a televised press briefing in Sagñay, Camarines Sur on Friday.

He added: “Now of course, President [Rodrigo R.] Duterte’s veto message strongly disagrees with the current system that offers reduced tax rates for qualified employees of regional headquarters and regional operating headquarters among others. To distinguish them from other similarly hardworking employees is in violation of the Equal Protection Clause of the Constitution.”

The spokesman explained that to further qualify present employees from future employees of ROHQs, OBUs (Offshore Banking Units), petroleum service contractors, and subcontractors is even more a violation of the Equal Protection Clause.

“Those enjoying the preferential rate are mostly managerial employees and those above them including Presidents and CEOs. Rank-and-file employees in the same company do not enjoy the same lower tax rates. President Duterte’s veto ensures the taxpayers are treated alike and high ranking and highly paid employees in the company are taxed appropriately as others.”

In December last year, Mr. Duterte vetoed the 15% preferential tax rate for employees of RHQs, ROHQs, OBUs, and petroleum service contractors and subcontractors, saying the preferential tax “is violative of the Equal Protection Clause under Section 1, Article III of the 1987 Constitution, as well as the rule of equity and uniformity in the application of the burden of taxation.”

“The overriding consideration is the promotion of fairness of the tax system for individuals performing similar work. Given the significant reduction in the personal income tax, the employees of these firms should follow the regular tax rates applicable to other individual taxpayers,” the President said in his veto message. — Arjay L. Balinbin