THE government is pushing forward with legislation that will implement a global minimum tax that will apply to multinationals operating in the country.
The Bureau of Internal Revenue (BIR) on Friday said that a technical working group (TWG) held its first meeting to develop the necessary tax framework to implement an international agreement requiring multinational enterprises with global annual revenues of 750 million euros or more to pay 15 percent minimum effective tax rate in jurisdictions where they operate.
The tax was introduced by the Organization for Economic Cooperation and Development (OECD) and the Group of 20 (G2) to address tax competition or a “race to the bottom” where countries slash tax rates to lure investors.
The Philippines, while not an OECD or G20 member, signed up in 2023. As planned the country will implement a qualified domestic minimum top-up tax to ensure that taxes paid by covered multinationals, or those that currently enjoy lower rates, reach 15 percent.
Finance Secretary Frederick Go last month said that he wanted the needed law to be passed this year.
“As a member of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, the Philippines must undertake the necessary policy and technical preparations for the possible implementation of the global minimum tax through appropriate domestic legislation,” Finance Undersecretary Rolando Ligon, who also chairs the TWG, said.
The TWG, formed by the BIR and the Department of Finance (DOF), serves as the primary inter-agency body that oversees the development, review and eventual implementation of the legislation, regulations and administrative measures necessary for the country’s GMT framework.
“Our task is to thoroughly address legal, tax, administrative, and operational issues involved and ensure that key policy decisions and recommendations are thoroughly studied before they are advanced,” Ligon said.
To ensure legislative and operational readiness, the TWG established five subgroups to work on the legal framework, tax administration and compliance, capacity development, stakeholder engagement and post-implementation monitoring.
The TWG also identified technical and policy priorities to boost the country’s readiness for GMT implementation. These include administrative and systems upgrades, auditing, taxpayer services, information technology systems interoperability and secure international data exchanges.
Officials also discussed international reporting alignment, including incorporating mechanisms for the exchange of information returns and country-by-country reporting requirements into local law.
“More than drafting legislation, the work ahead involves preparing the administrative processes, digital systems, technical capabilities, and institutional arrangements needed to implement the framework effectively and provide clear guidance to affected taxpayers,” BIR Commissioner and TWG Vice Chairman Charlito Mendoza said.
“The DOF and BIR will continue working closely with partner agencies, Congress, development partners, and stakeholders to develop a Philippine Global Minimum Tax framework that is aligned with international standards, administratively workable, and responsive to the country’s fiscal and investment policy objectives,” he added.
