Gov’t signs OECD multilateral tax treaty

The Philippines last week signed a multilateral tax treaty which is seen to boost the government’s revenue collection and strengthen its fight against tax evasion across borders.

In a statement issued on Monday, the Department of Finance said the Philippines was the 68th signatory to the Organization for Economic Cooperation and Development (OECD) Convention on Mutual Administrative Assistance in Tax Matters or MAC.

In behalf of the Philippine government, Internal Revenue Commissioner Kim S. Jacinto-Henares, who was granted special authority by President Aquino, signed the said agreement in Paris, France, last Friday.

MAC is a “multilateral agreement promoting international cooperation for effective implementation of national tax laws,” the DOF explained. It was developed by the 34-member OECD together with the Council of Europe. The Philippines, although now a party to the tax treaty, is not a member of the OECD, which groups mostly developed countries.

According to the DOF, an amending protocol of the MAC that was introduced in 2011 “aims to help developing countries secure the benefits of the new cooperative tax environment, including a multilateral approach for the automatic exchange of information.”

At present, MAC is in force in 22 countries, while its amended convention is being implemented in 28 countries.

As a signatory, the Philippines will have an “efficient and expeditious way of increasing our tax treaty network from 28 to 59 treaty partners, saving time, financial, and human resources spent on negotiating and updating bilateral tax treaties, which usually take five to 10 years to complete,” the DOF said.

It will also allow the BIR to run after foreigners who have tax deficiencies in the Philippines, as the agency will be granted jurisdiction over non-resident taxpayers. “Being a party it offers the Philippines several forms of assistance, including automatic exchange of information, assistance in recovery, service of documents, and the freezing of assets,” the DOF added.

In particular, signing MAC would aid the BIR in going after seven cases involving hundreds of millions in pesos worth of tax liabilities that had been filed under its Run After Tax Evaders (RATE) campaign.

The convention, however, must be ratified by the Philippine Senate.

The country formally expressed its interest to join the amended protocol in October last year.