Phl joins global committee

MANILA, Philippines - The Philippines welcomes the opportunity to participate in the Organization for Economic Cooperation and Development’s   Committee on Fiscal Affairs (CFA), which has become an influential voice in the field of tax administration.

Joining the CFA places the Philippines at the forefront of the joint effort from both developed and developing economies in addressing tax avoidance, base erosion and profit shifting.

The initiative is aimed at plugging the loopholes that allowed corporations and wealthy individuals to avoid paying their fair share of tax or use tax havens.

According to the OECD, base erosion and profit shifting by multinational firms have become a “global problem which requires global solutions.”

Taking the lead through the CFA – the steering, standard-setting, and decision-making body of the OECD – the Philippines will use its seat to present developing country perspectives and priorities, as well as shape strategies, tools, and other outputs to significantly improve the integrity of the tax system.

Internal Revenue Commissioner Kim Henares, who was recently been appointed by Ban Ki-moon as a UN international tax expert, said she was looking 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 to. We expect these corporations to at least contribute to building and developing the nations they made huge profits from,” Henares said.

 “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 added.

This initiative is also consistent with the Philippines’ need to rationalize fiscal incentives, which was certified as a priority bill by the Aquino administration.

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. Such revenue losses deprive governments of the capacity to invest in areas that actually boost investment, like infrastructure, health, and education, the OECD said.

Addressing BEPS will require multilateral cooperation on an international instrument that will give countries the tools they need to ensure that profits are taxed where economic activities generating the profits are performed and where value is created.

Aside from this, the Philippines is also invited to the  1st BEPS Technical Meeting for Partner Countries on  December 10-11,                             2014 in Paris, France.

Together with Albania, Jamaica, Kenya, Peru, Senegal, Tunisia, and many other countries yet to confirm, the Philippines will participate in discussions to build developing country capacity to counter the rising trend in BEPS.

The OECD initiative plans to roll out outputs by September 2015 and unveil the multilateral instrument sometime in December 2015.

The OECD CFA’s contributions in  tax administration area include researching and publishing good practice in tax administration, tracking the emergence of aggressive tax planning schemes and increasingly considering the administration dimension of tax policy development.