THE Philippines and the United States have entered into a reciprocal intergovernmental agreement meant to help curtail offshore tax evasion and avoidance.
Signed by Philippine Finance Secretary Cesar Purisima and US Ambassador to the Philippines Philip Goldberg on Monday, July 13, the agreement implements provisions of the Foreign Account Tax Compliance Act (FATCA), which requires US taxpayers to report financial assets abroad.
“The Philippines continues to stand at the forefront of fiscal transparency across the Asia-Pacific region, reaping measurable returns for our people,” Purisima said.
The Philippines and the US have an existing tax treaty with an Exchange of Information provision, which allows authorities to exchange data in response to a specific request, on an automatic basis or spontaneously.
“Tax evasion across borders is an alarming problem that we can beat back with openness and mutual cooperation This [intergovernmental agreement] is an affirmation of that ideal,” Purisima added.
The recent agreement introduces the automatic reporting of accounts held by Americans in Philippine financial institutions to the Bureau of Internal Revenue (BIR), which will then provide the information to the Internal Revenue Service (IRS) in the US.
The IRS will also routinely feed the BIR reports on financial accounts maintained by Philippine residents in US institutions.
“Today’s signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion – an objective that mutually benefits our two countries. By working together to detect, deter and discourage tax abuses through increased transparency and enhanced reporting, we can help to build a stronger, more stable, and more accountable global financial system,” Goldberg said at the signing.
Purisima said the agreement eases the compliance burden of Philippine financial entities, as the country risked a 30 percent withholding tax on certain US-sourced income if they did not comply with FATCA-related reporting requirements.
The US enacted FATCA in 2010 to fight offshore tax evasion through transparency and acquiring information on US taxpayer accounts in foreign countries.
To date, 65 FATCA agreements have been signed, 47 have been agreed into substance, and several others are under discussion. (With reports from GMA News, InterAksyon, Philstar and Rappler)
