THE PHILIPPINES is inching towards joining the Inclusive Framework on Base Erosion and Profit Shifting, an international standard that deters transnational companies from exploiting differences in national rules to minimize their tax exposure, the Department of Finance said.
“The Philippines is currently making significant progress in our efforts to assess our readiness to join the Inclusive Framework on Base Erosion and Profit Shifting (BEPS),” Undersecretary Antonette C. Tionko said at an Asian Development Bank forum late Monday.
“We’ve become more aware of the benefits of joining the BEPS inclusive framework,” she said.
The BEPS was put forward by the Organisation for Economic Co-operation and Development (OECD) and the G20 in order to address the mismatches in tax policy across various jurisdictions.
The International Framework on BEPS, established in 2016, has been accepted by 135 countries committed to implementing 15 measures to deter tax avoidance.
Ms. Tionko said the Philippines has identified potential areas of reform from studying the framework, including the policy on countering harmful tax practices and the prevention of tax treaty abuse.
“Likewise, we’re currently studying the benefits of acceding to the multilateral instrument to implement reforms,” she said. “We believe that the self-assessment exercise will build the foundation to meet the minimum standards for the BEPS Inclusive Framework.”
Meanwhile she said the Philippines is also now on track to fully design and develop a framework and a model for agreements on double taxation. The government started updating its double taxation agreements in 2018 to comply with international standards.
“In the same manner, the Philippines is also on target to conclude tax treaties with other ASEAN member states in line with our commitment under the ASEAN Regional Integration Framework. We are working closely with our foreign counterparts to ensure that we complete them and improve our network of bilateral agreements in the soonest possible time,” she said.
Pascal Saint-Amans, director at the Center for Tax Policy and Administration of OECD, said at the forum that he welcomes the developments in the Philippines as reported by Ms. Tionko.
Aside from the ongoing policy action, Mr. Saint-Amans said the OECD is also trying to build a long-term multilateral solution for the international community as issues on the taxation of the digital economy emerge.
“If you want to adopt the international tax rules to a digitized economy and a globalized economy, where value creation has changed, where you rely more on intangible property, where you have a few winners from globalization, you need to have a multilateral solution, because countries on a unilateral basis cannot do much,” he said.
“We would introduce a new nexus to recognize that the company can be taxed in the territory even if it has no physical presence in that country,” he added. — Beatrice M. Laforga