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Country in ‘white’ list of tax standard-compliant states

THE PHILIPPINES has been raised to the “white list” of countries complying with an Organization for Economic Cooperation and Development (OECD) tax information sharing standard.

“The Philippines today moved up to the list of jurisdictions that ‘have substantially implemented the internationally agreed tax standard’,” the OECD yesterday said in a statement.

The announcement came shortly after Finance Secretary Cesar V. Purisima, who is in the United States, signed Revenue Regulations (RR) 10-2010 that will be used to implement Republic Act (RA) 10021 or The Exchange of Information on Tax Matters Act.

RR 10-2010 will still have to be published in a newspaper of general circulation before taking effect 15 days after.

BusinessWorld reported last Monday that Finance and tax bureau officials were finalizing RA 10021’s implementing rules in time for a September 29 to 30 meeting in Singapore of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The forum monitors compliance with the OECD tax standard among OECD and non-OECD member states.

The country landed on the OECD’s list of tax havens last April 2, 2009 and was transferred to the “grey list” after it pledged to uphold the standard. RA 10021 became law in March this year.

“The Philippines has a network of more than 30 treaties that provide for exchange of information in tax matters. Until now, however, domestic legal restrictions prevented its tax authorities from obtaining and exchanging certain types of information … The new law and regulations remove these restrictions, thus enabling many of the Philippines’ existing treaties to meet the international standard,” the OECD said in the statement.

Internal Revenue Commissioner Kim S. Jacinto-Henares, whose agency is tasked with implementing RA 10021, said money flows “would now be easier.” Ms. Jacinto-Henares is currently attending the Global Forum meet.

Revenue Regulations 10-2010 expounded on the provisions of RA 10021, particularly on Section 3, which gave the Bureau of Internal Revenue (BIR) commissioner the authority to look into bank deposits upon the request of a foreign tax authority.

A Finance official said there were “misinterpretations” on a provision that states tax information may be given to foreign authority “provided that such information would be used for tax assessment, verification, audit, and enforcement purposes.”

This has been clarified in the rules, which state “the BIR is likewise authorized to use, for tax assessment, verification, audit and enforcement purposes, any such information” requested.

The regulations also give foreign tax authorities the authority to inspect tax returns upon order of the president, subject to rules that may be prescribed by the BIR and the Finance department.

Sanctions for financial institutions that refuse to give information were set at fines ranging from P50,000 to P100,000, imprisonment or both.

The implementing rules also distinguished between tax information exchange agreements (TIEAs) and double taxation agreements (DTAs).

The Finance official said the country had a total of 36 DTAs “where a provision on tax exchange information is already present.” However, those are non-compliant with TIEAs that are the OECD standard. “[OECD representatives] said they will look into our agreements [and] the requirement was 12 ‘good’ agreements,” the official said.

The Philippines will next week start undergoing a Phase 1 peer review by the Global Forum, which involves examination of local laws and TIEAs. The white list upgrade is expected to work in its favor. — PPM, Businessworld