Ten to 15 regional headquarters of multinational companies (MNCs) have pulled out of the country, according to the Philippine Association of Multinational Companies Regional Headquarters Inc. (Pamuri).
Pamuri, which represents the industry, is not aware of the reasons behind the exit of these regional operating headquarters and regional headquarters, but one of its top officials could not help but question the timing of their move.
Pamuri director Celeste Ilagan said the government’s tax reform program might be one of the reasons for the pullout as it made it too expensive for these headquarters to keep highly skilled workers or hire new ones.
The identities of these headquarters were not disclosed, but their departure hinted at how some companies could not sustain their businesses under an uncertain business environment.
Ilagan said 10 to 15 companies had left so far, citing data from the Board of Investments (BOI), the agency that regulated the industry. The BOI has not responded to requests for comment as of press time.
“This number came from the BOI. I don’t know if they did any exit interview with these companies. What probably is important to note is that those closures happened after the passage of the TRAIN [law],” she told reporters on the sideline of the Arangkada forum.
The Tax Reform for Acceleration and Inclusion (Train) Act lowered the personal income tax of Filipinos while raising consumption taxes, leading to higher prices of goods such as fuel, sugar sweetened drinks and cars.
This law also removed the preferential tax rate of 15 percent for employees of MNC headquarters.
While critics called the preferential tax rate unfair, the industry said it was a way to entice top talents to join the industry and earn as much as they would have if they worked as professionals abroad.
“They are companies that hire very specialized skilled workers. If these workers lose the advantage of staying in an ROHQ, and that is the preferential tax rate, the company will find it difficult to support its operations in the Philippines, " Ilagan said.
MNCs established these ROHQs and RHQs to cater to their affiliates, subsidiaries or branches in the global market. The Philippines is one of many countries trying to attract the investments of these MNCs. Since they had a broad networks, Ilagan said it was easy for them to move out.
At 15-percent tax rate, the Philippines was just at par with Hong Kong, which offered 2 percent to 17 percent personal income tax, and Singapore, 0 percent to 22 percent.
The group estimated back in 2017 that there were about 5,000 workers who enjoyed this preferential tax perk. This incentive, according to Ilagan, is just one of three incentives that MNCs use as basis in deciding where to put up their HQs.
The two others are the 10-percent corporate income tax and the exemption from local business tax, which would be removed under Citira.