THE country’s expected removal next year from a watch list maintained by the Organisation for Economic Cooperation and Development (OECD) for “harmful tax policy” was cheered by the chairman of the House Committee on Ways and Means.
Albay Rep. Joey Sarte Salceda, the panel chairman, said the country’s exclusion in the OECD watch list was due to enactment of Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (Create) Act.
“We have received assurances that we will be removed this year. This is a welcome development and is yet another clear benefit of Create to our international competitiveness and standing,” Salceda said in a statement.
RA 11534 will effectively remove the 10-percent preferential tax rate next year, which convinced the OECD to remove it from the classification, known as the Forum on Harmful Tax Practices (FHTP).
The FHTP was created in 1998 to assess preferential tax schemes and identify those that could be harmful.
According to Salceda, the Philippines was flagged for the Regional Operating Headquarters (ROHQ) preferential tax, which the OECD said grants foreign companies an advantage over domestic taxpayers and those benefitting from the preferential rate are not bound to performance commitments.
“The preferential treatment was on its death throes anyway, with just one applicant in 2019. So, it was not worth endangering our international standing,” Salceda said. “This makes us less of a tax pariah, and more a good global citizen. This means well for our bid to get broader investments from the developed world.”
Transparency
SALCEDA, meanwhile, said his committee is committed to continuing to remove harmful tax practices until the end of the 18th Congress.
“We have plenty more to axe; digital taxation loopholes are one. Many digital companies provide services in the Philippines to Filipinos without paying VAT [value-added tax]. We are closing those loopholes with the Digital Taxation Act. No new taxes, just same taxes for the same kind of business, since Filipinos pay VAT for digital services,” Salceda said.
The lawmaker added he is also pushing to make gaming taxes more transparent by improving reportorial requirements for Philippine Offshore Gaming Operators.
This is, of course, “would be a harmful tax practice unless we adopt my proposal to define them as ‘doing business in the Philippines,’” Salceda added.
The lawmaker said the committee will also push through with the General Tax Amnesty with relaxation of absolute bank secrecy for those who will avail.
“Our bank secrecy laws have already gotten us into so much trouble, by having us in the Financial Action Task Force (FATF) grey list,” Salceda said. “We have to make the system more transparent.”
He added that until the Bank Secrecy Law remains absolute, “our financial monitoring and anti-money laundering regime will remain suspect.”
“The delay in the passage of this measure is the biggest obstacle to improvements in our FATF standing,” Salceda said.