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The United States and the Philippines signed an intergovernmental agreement (IGA) in their bid to fight offshore tax evasion.
Ambassador Philip Goldberg and Finance Secretary Cesar Purisima signed the IGA to implement provisions of the Foreign Account Tax Compliance Act (FATCA) to promote transparency in financial accounts between the two nations on tax matters.
Goldberg said the agreement brings mutual benefits to US and PH and “marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion.”
“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 added.
The two countries have an existing tax treaty containing an Exchange of Information provision, a valuable tool for promoting tax cooperation between countries. Under that provision, information may be exchanged between the competent authorities in response to a specific request, or on an automatic basis, or spontaneously.
“The Philippines continues to stand at the forefront of fiscal transparency across the Asia-Pacific region, reaping measurable returns for our people. 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,” Purisima said.
The IGA introduces the 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 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 US financial institutions.
Purisima said the IGA also eases the compliance burden of Philippine financial institutions, who risked facing a 30 percent withholding tax on certain US-sourced income if they failed to comply with FATCA-related reporting requirements.
The US has intergovernmental agreements with more than 110 jurisdictions and several others are under discussion. The United States enacted FATCA in 2010 to combat offshore tax evasion by encouraging transparency and obtaining information on accounts held by US taxpayers in other countries.
This article has been re-published with permission from ABS-CBNnews.com.
