PH joins OECD fiscal affairs committee

The Philippines will take part in the Organization for Economic Cooperation and Development's ( OECD) Committee on Fiscal Affairs (CFA) to help steer the global response to base erosion and profit shifting ( BEPS), which refers to tax planning strategies aimed at eroding taxable base to avoid paying the right amount of tax.

According to the Department of Finance (DOF) this places the Philippines at the forefront of the joint effort from both developed and developing economies in addressing troubling trends in unfair and unjust tax avoidance and evasion.

“The Philippines will use its seat to present developing country perspectives and priorities, as well as shape strategies, tools, and other outputs to curb the global BEPS phenomenon,” DOF said.

BEPS is used to describe tax planning strategies that rely on mismatches and gaps that exist between the tax rules of different jurisdictions. It is aimed at shifting profits in ways that erode the taxable base.

Internal Revenue Commissioner Kim S. Jacinto- Henares, who was recently been appointed as United Nations international tax expert, welcomed this development.

“We look forward to developing international tools to combat base erosion and profit shifting. Together, we can address a fundamentally unfair practice where multinationals make a huge profit in countries they pay little to no taxes,” Jacinto-Henares said.

“We expect these corporations to at least contribute to building and developing the nations they made huge profits from,” she added.

Referencing the recently concluded International Tax Forum organized by the DOF, Jacinto-Henares added, “Living in an increasingly globalized world requires governments to adapt and update tax policy and enforcement strategies.”

“International cooperation is key if we want to raise sustainable amounts of revenues to continue funding growth and investments to our people and country,” she said.

The official also said this initiative is consistent with the Philippines’ need to rationalize fiscal incentives, a DOF priority bill on which is pending in Congress.

While empirical evidence shows that granting of tax incentives is not a key motivation for multinationals on investment locations, it remains a major source of revenue loss for developing economies.

The OECD strategy hinges on three main pillars: The coherence of corporate tax at the international level, the realignment of taxation and substance, and transparency coupled with certainty and predictability.