House Ways and Means Chair Joey Salceda 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 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 percent 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,” he said.

“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 percent corporate income tax rate, plus enhanced deductions for 25 years,” Salceda added. Office of Albay Rep Joey Salceda