Philippines removed from tax blacklist

The Philippines has been stricken off the Organization for Economic Cooperation and Development’s (OECD) gray list of countries that committed to but have not yet fully complied with international tax standards, the Department of Finance said over the weekend.

“We were already removed from the (OECD) blacklist,” Finance Secretary Margarito Teves said.

In April, the OECD said that the Philippines, along with Costa Rica, Malaysia and Uruguay, had not committed to the internationally agreed standards on exchanging tax information.

According to the Finance department, the country’s tax laws currently require a “domestic tax interest” to obtain information which can be shared with foreign tax authorities.

“The objective is to take the necessary steps to be fully compliant and maximize benefits of information exchange,” Teves said.

The department said possible sanctions for noncompliance include political pressure on global companies to withhold investment in a tax haven, reduction in aid and increased disclosure requirements by companies and individuals using tax havens.

The Bangko Sentral ng Pilipinas, however, said that the country has laws sufficient to guarantee that it does not become a “haven” for foreigners to deposit their money to avoid taxes in their respective countries.

But according to the Finance department, amendments must be done in the three provisions of the National Internal Revenue Code: bank deposits, Section 6(F); tax returns, Section 71; and penalties, Section 270.

Under Section 6(F), the department proposed to expand the authority of the commissioner of the Bureau of Internal Revenue to inquire into the bank deposits to provide information upon request of foreign tax authorities.

Amendments to Section 71 proposed to broaden the scope to include income tax returns whether the commissioner assessed them and for foreign tax authorities to be allowed to inspect the income tax returns.

An existing provision under Section 270 does not penalize disclosure of trade secrets if made pursuant to Section 71. The department proposed not only information on trade secrets, but also all information obtained in the course of exchange of information except if made pursuant to Sections 6(F) and 71.

Teves said safeguards to protect taxpayers’ rights will be provided under the implementing rules, such as supply of information, which will be subjected to conditions to ensure that the unearthing of information is not a fishing expedition. — Lailany P. Gomez, Manila Times