THE Philippines is joining a committee of the Organization for Economic Cooperation and Development (OECD) to take part in a joint effort by both developed and developing economies to address unfair and unjust tax avoidance and evasion by multinational firms.
The Department of Finance (DOF) said the Philippines is joining the OECD Committee on Fiscal Affairs (CFA) beginning January 2015 and will have a major role in steering the global response to base erosion and profit shifting.
Base erosion and profit shifting (BEPS) by multinational enterprises, according to the OECD, is a “global problem which requires global solutions.”
Exploiting gaps, mismatches, and asymmetries in domestic and international tax rules, BEPS artificially erodes the tax base by shifting profits to low or no-tax locations, where little to no economic activity and value creation has taken place.
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 curb global BEPS phenomenon, the finance agency said.
The DOF added that while most tax planning resulting in BEPS is legal because of the said gaps and loopholes, the double non-taxation it engenders distorts competition and investment decisions.
More importantly, BEPS is “an issue of fairness,” especially for developing countries who expect revenues from corporate income taxes when multinationals make profits in their respective jurisdictions, it said.
“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 to. We expect these corporations to at least contribute to building and developing the nations they made huge profits from,” said Bureau of Internal Revenue Commissioner Kim Henares.
Henares said that 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 for our people and country,” she concluded.