DOF: PH not ready for 15% minimum corporate tax
At A Glance
- The Department of Finance (DOF) considers it premature for the Philippines to implement the proposed minimum corporate income tax rate proposed by advanced economies.<br>Finance Secretary Benjamin E. Diokno stated that the 15 percent global corporate minimum tax, proposed by the OECD, is still undecided.<br>The OECD's plan includes a 15 percent corporate minimum tax on the foreign earnings of major multinational corporations.<br>The framework aims to discourage countries from engaging in tax competition with lower rates that lead to profit shifting and tax base erosion.<br>The OECD proposal has received support from 137 countries and jurisdictions.<br>The current Philippine corporate income tax rate stands at 25 percent for large companies and 20 percent for small firms.<br>Although the 15 percent global minimum is seen as a positive measure to discourage tax competition, Diokno highlighted that many countries are hesitant to lower their rates due to concerns about potential revenue loss.<br>The finance chief emphasized the need to carefully consider whether the country can afford to adopt the 15 percent tax rate.<br>Diokno also underlined that the tax regime is not the sole factor in attracting investors to the country.
The Department of Finance (DOF) said it is premature for the Philippines to consider implementing the minimum tax rate on corporate income, as proposed by advanced economies.
Finance Secretary Benjamin E. Diokno said on Tuesday, Nov. 28, that the 15 percent global corporate minimum tax, proposed by the Organisation for Economic Co-operation and Development (OECD), remains undecided.
The OECD has formulated a plan that includes a 15 percent corporate minimum tax on the foreign earnings of major multinational corporations.
The framework is designed to deter countries from engaging in tax competition by offering lower tax rates that lead to the shifting of corporate profits and erosion of the tax base.
The OECD proposal has garnered the backing of 137 countries and jurisdictions.
However, Diokno said that for the Philippines, “it's too early to go to 15 percent.”
The Philippine corporate income tax rate is currently at 25 percent for large companies, and at 20 percent for small firms.
Although the 15 percent global minimum is considered "a good floor" for discouraging tax competition, Diokno noted that many countries are reluctant to reduce their rates to attract investors due to concerns about potential revenue loss.
“You have to weigh whether you can really afford the 15 percent,” the finance chief said.
Diokno, meanwhile, said that the tax regime is not the sole consideration for attracting investors to the country, saying the primary focus lies on the economic opportunities being made available to them.
“Another factor will be the availability of labor,” Diokno said. “We have the youngest population in in this part of the world—25 years old is the median age, so that's very attractive.”
“Ease of doing business is also being considered along with power costs, which is one of our disadvantages now,” he added.
Earlier, House Committee on Ways and Means Chair and Albay Rep. Joey Sarte Salceda said the Philippines needs to prepare for the consequences of the imposition of the global minimum corporate tax.
“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,” Salceda said.
“But it will come; and when it does, it could affect our tax incentives system,” he added.