Harmonization of tax systems ongoing

THE PHILIPPINES alongside members of the Organization for Economic Cooperation and Development (OECD) as well as other developing countries are developing a multilateral tool that will align bilateral tax treaties with global initiatives aimed at plugging tax leaks across borders.

In a statement, the OECD reported that 80 countries belonging to the ad hoc group working on Action 15 of the Base Erosion and Profit Shifting (Beps) Action Plan met in Paris, France, last May 27.

“Action 15 of the Beps project analyzed the possibility of developing a multilateral instrument in order to allow countries to swiftly amend their tax treaties to implement the tax treaty-related Beps recommendations,” the OECD said.

In general, the Beps initiative “aims to create a coherent set of international tax rules to end the erosion of national tax bases and the artificial shifting of profits to jurisdictions solely to avoid paying tax.”

But “[t]he Beps project sets out 15 actions, many of which cannot be tackled without amending bilateral tax treaties. Given the sheer number of treaties in effect, implementing these changes on a treaty-by-treaty basis would be a very lengthy process,” the OECD explained.

According to the OECD, a report titled “Developing a Multilateral Instrument to Modify Bilateral Tax Treaties” had noted that “such a multilateral instrument is not only feasible but also desirable, and that negotiations for the instrument should be convened quickly.”

During the ad hoc group meeting, “[p]articipants agreed on a number of procedural issues so that the substantive work can begin at an inaugural meeting [on Beps] which will take place on Nov. 5-6,” the OECD said.

Revenue Commissioner Kim S. Jacinto-Henares was appointed as vice chair of the ad hoc group, alongside China’s Liao Tizhong and Morocco’s Mohammed Amine Baina.

The United Kingdom’s Mike Williams chaired the group.

Last year, the OECD announced that the Philippines was one of the 10 developing countries that would participate in the meetings of its Committee on Fiscal Affairs—the key decision-making body of the Beps project—as well as its technical working groups starting January this year.

Besides the Philippines, the other members of the ad hoc group are: Andorra, Argentina, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belgium, Bhutan, Brazil, Bulgaria, Burkina Faso, Canada, China, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, Dominican Republic, Fiji, Finland, France, Georgia, Germany, Greece, Guatemala, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea, Latvia, Lebanon, Liberia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Marshall Islands, Mauritius, Mexico, Moldova, Morocco, Netherlands, New Zealand, Nigeria, Norway, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Senegal, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Swaziland, Sweden, Switzerland, Tanzania, Thailand, Tunisia, Turkey, United Kingdom, Uruguay, Vietnam and Zambia.