MANILA, Philippines – Finance Secretary Cesar V. Purisima and United States Ambassador to the Philippines Philip S. Goldberg signed on July 13 a reciprocal intergovernmental agreement (IGA) to implement provisions of the Foreign Account Tax Compliance Act (FATCA).
The agreement is designed to promote transparency in financial accounts between the two countries.
It also highlights growing international cooperation to curb offshore tax evasion and avoidance.
The IGA introduces automatic reporting of financial accounts maintained by US persons in Philippine financial institutions to the Bureau of Internal Revenue (BIR), which, in turn, will annually transmit the information to the US Internal Revenue Service (IRS).
The IRS will also routinely provide the BIR reports on financial accounts maintained by Philippine residents in US financial institutions.
According to Purisima, signing the IGA also eases the compliance burden of Philippine financial institutions, which risked facing a 30% withholding tax on certain US-sourced income if they failed to comply with FATCA-related reporting requirements.
Premised on safeguards
The automatic reporting of financial accounts is premised on appropriate safeguard measures to ensure confidentially of information that will be used solely for tax purposes, and the necessary infrastructure to effect timely, accurate, and secure exchange.
Once in place, these will trigger the automatic exchange.
FATCA was enacted by the US in 2010 to combat offshore tax evasion by encouraging transparency and obtaining information on accounts held by US taxpayers in other countries.
It is rapidly becoming the global standard in efforts to curtail offshore tax evasion.
“The Philippines continues to stand at the forefront of fiscal transparency across the Asia-Pacific region, reaping measurable returns for our people. In fact, fiscal transparency is one of the 4 pillars of the Cebu Action Plan (CAP) the Philippines is advancing in its hosting of the Asia Pacific Economic Cooperation (APEC) Finance Ministers’ Process (FMP) meetings,” Purisima said.
Tax evasion across borders is an alarming problem that both countries can beat with openness and mutual cooperation, he said. This IGA is an affirmation of that ideal, he added.
Goldberg stated, “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.”
To date, 65 FATCA IGAs have been signed, 47 agreements have been agreed to in substance, and several others are under discussion.
The two countries have an existing tax treaty containing an Exchange of Information provision, a tool for promoting tax cooperation between countries.
Under this, information may be exchanged among relevant authorities in response to a specific request, or on an automatic basis, or spontaneously. – Rappler.com
There are no comments yet. Add your comment to start the conversation.