The Philippines has signed an inter-governmental agreement (IGA) with the US for the implementation of the Foreign Account Tax Compliance Act (FATCA), which aims to curtail offshore tax evasion.
The agreement has been designed to promote transparency in financial accounts between the two countries.
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The agreement was signed between finance secretary Cesar Purisima and US Ambassador to the Philippines Philip Goldberg.
Under the accord, Philippines financial institutions will provide with details of US account-holders to their central authority Bureau of Internal Revenue, which will be passed on to the US Internal Revenue Service (IRS).
The pact will see both the countries working together to clamp down on offshore tax evasion and avoidance.
The Philippines and the US already has a tax treaty, which provides for an information exchange in response to a specific request on an automatic basis or spontaneously.
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By GlobalDataAs per the FATCA law, failure by an FFI to disclose information on their US clients will result in a requirement to withhold 30% tax on payments of US-sourced income.
The automatic reporting of financial accounts will ensure confidentially of information that will be used solely for tax purposes, and the necessary infrastructure to effect timely, accurate, and secure exchange.
Purisima said: "The Philippines continues to stand at the forefront of fiscal transparency across the Asia-Pacific region, reaping measurable returns for our people. This IGA is an affirmation of that ideal."
Goldberg said: "Today’s signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion – an objective that mutually benefits our two countries.
"By working together to detect, deter, and discourage tax abuses through increased transparency and enhanced reporting, we can help to build a stronger, more stable, and more accountable global financial system."
Currently, 65 FATCA IGAs have been signed, among which 47 agreements have been agreed to in substance, and several others are under discussion.
