OECD Convention on Mutual Administrative Assistance in Tax Matters to Enhance Tax Compliance
The Philippines has become the 68th signatory to the OECD Convention on Mutual Administrative Assistance in Tax Matters (MAC). Bureau of Internal Revenue (BIR) Commissioner Kim Jacinto Henares, granted special authority from the Office of the President, signed the agreement in Paris last Friday.
The MAC, jointly developed by the Organization for Economic Cooperation and Development (OECD) and the Council of Europe, is a multilateral agreement promoting international cooperation for effective implementation of national tax laws. An amending protocol, entered into force in 2011, aims to help developing countries secure the benefits of the new cooperative tax environment, including a multilateral approach for the automatic exchange of information.
Before signing the agreement, BIR Commissioner Kim Henares said, “We highly look forward to becoming a party to the convention. As the Philippines continues to grow, the government continues to look for ways to increase revenues to support this growth and ensure that critical investments in infrastructure and social services for our people are amply funded.”
Signing the agreement gives the Philippines an efficient and expeditious way of increasing our tax treaty network from 28 to 59 treaty partners, saving time, financial, and human resources spent on negotiating and updating bilateral tax treaties, which usually take five to ten years to complete. To enter into force, the Convention must now be ratified by the Philippines.
The agreement also grants the country a valuable tool for fighting tax evasion and improves international compliance of taxpayers, allowing the BIR to obtain jurisdiction over non-resident taxpayers who have tax liabilities in the Philippines. Being a party offers the Philippines several forms of assistance, including automatic exchange of information, assistance in recovery, service of documents, and the freezing of assets.
The MAC, according to the BIR, will directly impact at least 7 Run After Tax Evaders (RATE) cases estimated to amount in the hundreds of millions of pesos. “Every tool we use to enhance our country’s revenue generating capacity is a weapon we take to the fight for every Filipino’s right to have quality public goods and services,” Henares added.
The Philippines formally expressed interest in becoming a party to the amended convention last 10 October 2013. The MAC is currently in force in 22 countries while the protocol or amended convention is in force in 28 countries.