BIR, BOC urged to review international tax agreements

The National Tax Research Center (NTRC) urged the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) to review various international tax agreements being used by multinational corporations in the Philippines as some companies may be using these treaties to avoid paying taxes.

This is one of several recommendations which NTRC has laid down for the BIR and the BOC to enhance tax collection and meet their respective collection goals.

“It is also suggested that aside from the audit and investigation process, the provisions of various international tax agreements and tax treaties usually used by multinational corporations for their tax avoidance or tax reduction schemes be revisited to determine whether there is a need for an amendment,” NTRC executive director Lina D. Isorena said in a recent memorandum to the Department of Finance (DOF).

In its memorandum dated July 27, 2007, the NTRC also recommended a stricter review and monitoring of companies availing fiscal incentives from the government.

The government, through its investment promotion agencies such as the Philippine Economic Zone Authority (PEZA), Board of Investments, Subic Bay Metropolitan Authority and the Clark Economic Zone Authority, grants private firms tax perks to lure them into investing in the country.

Incentives include income tax holiday and duty-free importation on capital equipment.

The NTRC, noted, however, that several of its studies have shown that without a strict monitoring or reporting system, the government’s fiscal incentive provisions are prone to abuse and could create opportunities for tax leakages.

As such, the NTRC recommended the establishment or institutionalization of a coordinating network among the BIR, the BOC and the concerned investment promotion agency.

For instance, the NTRC said, the concerned government agencies must have the proper documentation on the type and amount of fiscal incentives that the investor is entitled to as well as the basis for entitlement.

Concerned government agencies must require investors to submit the necessary documents that could substantiate their claims for fiscal incentives as well as other pertinent information on the sales, revenues and their volume of importation, the NTRC said.