HOUSE Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the Philippines should prepare for the consequences of the imposition of the Global Minimum Corporate Tax, which may require multinationals currently in the Philippines to pay a top-up tax in their countries of origin. The House tax panel chair made the pronouncement today as the committee approved the substitute bill for the CREATE Law amendments.
“We need to prepare for when countries accede to this regime,” Salceda said. The global minimum tax is under the Organisation for Economic Co-operation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
The framework introduces a 15% global tax for multinational companies with at least EUR 750 million revenue.
“Major Philippine trade partners like Japan and Korea have already approved their legislation on the matter. So, it will already definitely affect us.”
“Among all ASEAN-6 economies, only the Philippines has not made significant progress in implementing the rules. But it will come. And when it does, it could affect our tax incentives system,” Salceda said.
“Those who are under the income tax holiday or special corporate income tax regime of 5% might be required to pay a top-up tax in their home countries. When that happens, our tax breaks will be quite ineffective in promoting foreign investments. So, we have to imagine new non-tax incentives such as infrastructure and market promotion that make doing business here easier and more profitable.”
Salceda said that the amendments to the CREATE Law should thus consider how to evolve a tax incentive regime that complies with the global minimum tax but still attracts foreign investors.
“I am personally thinking of a tax regime where we impose a 15% corporate income tax rate, plus enhanced deductions for 25 years,” Salceda added.
CREATE amendments move to House plenary
Salceda invited the Department of Finance and other stakeholders to propose amendments to the CREATE Law that will make the country’s tax incentives compliant with the global minimum tax scheme.
“I am instructing the DOF and other stakeholders to propose these enhancements so we can discuss them in the floor.” Salceda moved, however, to approve the bill today “so we make progress already on the issues already resolved.”
“For today, I beg the indulgence of the stakeholders that we approve a bill so that we have something to discuss in the House floor. The President has instructed us to get this done, and the leadership is trying to approve it by end of this month,” Salceda said.