NEWS
Mar-19-2010 Philippine President Approves Law on Tax Information Exchange
On March 5, 2010, Philippine President Gloria Macapagal Arroyo signed into law Republic Act 10021, allowing the exchange of tax information pursuant to internationally agreed tax standards with the country’s tax treaty partners. The passage of this law is in compliance with the Philippines’ commitment last year to the Organisation for Economic Cooperation and Development (OECD) to implement an international standard on the exchange of tax information.
Section 2 of Republic Act 10021 states: “It is the declared policy of the State to promote and pursue tax environment that contributes in sustaining a favorable international investment climate and instills confidence in the adequacy and capacity of the country’s tax administration to comply with its commitments under existing international conventions or agreements on tax matters.”
The Bureau of Internal Revenue (BIR) is now authorised to exchange information on tax matters with foreign counterparts to help fight international tax evasion. The new law further allows the BIR to enquire into bank deposits and other related information held by financial institutions in order to supply information to a requesting foreign tax authority. The new law also provides for certain sanctions against bank officers who refuse to supply requested tax information. The requesting foreign tax authority is likewise mandated to maintain the confidentiality of the information received.
Republic Act 10021 will also allow a requesting foreign tax authority to study the income tax returns of taxpayers upon the order of the President, subject to rules and regulations on the necessity and relevance that may be promulgated upon enactment of the law.
It will also penalise BIR personnel for unlawfully divulging information obtained from banks to persons other than the requesting foreign tax authority.
The Philippine government hopes that with the passage of this new law, it can help promote a tax environment that contributes to a favourable climate of international trade and investments.
The country’s strict bank secrecy laws had made it very difficult to comply with the provisions on the exchange of information set by international organisations.
Early last year, the Philippines was placed on the list of tax jurisdictions that had not committed to the Internationally Agreed Tax Standards (IATS). But on April 2, 2009, the Philippines, together with Uruguay, Malaysia and Costa Rica, was removed from the list and avoided sanctions after committing to comply with the IATS.