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Salceda welcomes PH exclusion in OECD watchlist for “harmful tax policy” due to CREATE

June 29th, 2021

Salceda welcomes PH exclusion in OECD watchlist for “harmful tax policy” due to CREATE; House tax chief pushes reforms to make Philippine tax system transparent

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) has welcomed the country’s coming removal from a watch list maintained by Organisation for Economic Cooperation and Development (OECD) next year which had flagged the Philippine preferential tax scheme for regional operating headquarters (ROHQs) of multinational companies.

“We have received assurances that we will be removed this year. This is a welcome development, and is yet another clear benefit of CREATE to our international competitiveness and standing,” Salceda said.

Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act will effectively remove the 10% preferential tax rate next year, which convinced the OECD to remove it from the classification, known as the Forum on Harmful Tax Practices (FHTP).

The FHTP was created in 1998 to assess preferential tax schemes and identify those that could be harmful.

The Philippines was flagged for the ROHQ preferential tax, which the OECD said grants foreign companies an advantage over domestic taxpayers. Those benefitting from the preferential rate are not bound to performance commitments.

“The preferential treatment was on its death throes anyway, with just 1 applicant in 2019. So, it was not worth endangering our international standing,” Salceda added.

“This makes us less of a tax pariah, and more a good global citizen. This means well for our bid to get broader investments from the developed world,” Salceda explained.

Reforms to make tax system more transparent

Salceda also says that his committee is committed to continuing to remove harmful tax practices.

“We have plenty more to axe. Digital taxation loopholes are one. Many digital companies provider services in the Philippines to Filipinos without paying VAT. We are closing those loopholes with the Digital Taxation Act. No new taxes, just same taxes for the same kind of business, since Filipinos pay VAT for digital services,” Salceda said.

“We also plan to push through with the General Tax Amnesty with relaxation of absolute bank secrecy for those who will avail. Our banks secrecy laws have already gotten us into so much trouble, by having us in the Financial Action Task Force (FATF) grey list. We have to make the system more transparent,” Salceda added.

“I am also pushing to make gaming taxes more transparent by improving reportorial requirements for POGOs, which of course, would be a harmful tax practice unless we adopt my proposal to define them as “doing business in the Philippines,”” Salceda explained.

“All in all, the House Committee on Ways and Means has been very proactive in making our tax system more modern and more transparent. I welcome the OECD improvement and our committee is ready to work on more reforms,” Salceda concluded.

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