13 July 2015 | Manila, Philippines– Finance Secretary Cesar V. Purisima and U.S. Ambassador to the Philippines Philip S. Goldberg signed a reciprocal intergovernmental agreement (IGA) to implement provisions of the Foreign Account Tax Compliance Act (FATCA) to promote transparency in financial accounts between the two nations for tax purposes. The agreement underscores growing international cooperation to curb offshore tax evasion and avoidance.
Finance Secretary Purisima, signing on behalf of the Republic of the Philippines, said, “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.
Tax evasion across borders is an alarming problem that we can beat back with openness and mutual cooperation. This IGA is an affirmation of that ideal.”Ambassador 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.”The two countries have an existing tax treaty containing an Exchange of Information provision, a valuable tool for promoting tax cooperation between countries. Under said provision, information may be exchanged between the competent authorities in response to a specific request, or on an automatic basis, or spontaneously.The innovation that the IGA introduces is the automatic reporting of financial accounts maintained by U.S. persons in Philippine financial institutions to the Bureau of Internal Revenue (BIR), which, in turn, will annually transmit the information to the U.S. Internal Revenue Service (IRS).The reciprocal nature of the IGA provides the equivalent benefit to the Philippines as the IRS will routinely provide the BIR reports on financial accounts maintained by Philippine residents in U.S. financial institutions. According to Secretary Purisima, signing the IGA also eases the compliance burden of Philippine financial institutions, who risked facing a 30 percent withholding tax on certain U.S.-sourced income if they failed to comply with FATCA-related reporting requirements.The automatic reporting of financial accounts is premised on the 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.Enacted by the U.S. in 2010 to combat offshore tax evasion by encouraging transparency and obtaining information on accounts held by U.S. taxpayers in other countries, FATCA is rapidly becoming the global standard in the effort to curtail offshore tax evasion. To date, 65 FATCA IGAs have been signed, 47 agreements have been agreed to in substance, and several others are under discussion.
Read the original IGA document here: http://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FATCA-Agreement-Philippines-7-13-2015.pdf