Some BPO Companies Are Thinking Of Closing Because of TRAIN

January 1, 2018, marks that day where the first package of the Tax Reform for Acceleration Inclusion (TRAIN) was implemented. This package is a quarter of the planned packages of the government towards a better country.

TRAIN brought about the increase of products like tobacco and petroleum. Along with it comes the lowering of the income tax that ordinary employees have to pay. This resulted in the higher take-home pay for these employees.

Train Image
PHOTO CREDIT: ABS-CBN

However, employees of multinational companies who chose to put up their regional headquarters here in the Philippines, including some known BPO companies are experiencing the opposite.

Under the president’s order, the income tax of these employees is increased to 35 percent. If their companies decide to shoulder the tax income tax increase, it is estimated that they would have to endure 5-7 percent increase in their operational cost.

Dilemma

The companies’ dilemma is that if they don’t shoulder the income tax of the employees and if they allow their employees to have lower take-home pays, then it is not impossible that their skilled workers might go abroad or somewhere else with lower income tax.

Furthermore, for the second package of the TRAIN law, these companies’ 10 percent tax incentives might be removed. The second package was already submitted and is planned to be implemented this year.

Close for good

According to ABS-CBN’s source, three of the top multinational companies that have regional headquarters here in the Philippines are contemplating and are thinking about closing for good.

The Bureau of Internal Revenue (BIR), however, explains that they are just following what the president has ordered. The order aims to even out the tax amount that employees are paying and to have a fairer tax law.

An appeal to the Department of finance was raised to retain the special tax rate for the companies who were already here before January 2018.