By Joann Santiago
MANILA, July 13 (PNA) — The Bureau of Internal Revenue (BIR) will now automatically report to the US Internal Revenue Service (IRS) about the financial accounts being held by US citizens in the Philippines and vice versa.
This after Finance Secretary Cesar V. Purisima and US Ambassador to the Philippines Philip S. Goldberg signed Monday a reciprocal inter-government agreement (IGA) that paved the way for the implementation of provisions of the Foreign Account Tax Compliance (FATCA).
FATCA was enacted by US Congress in 2010 to, among others, prevent US citizens from withholding information about their assets overseas.
It requires foreign financial institutions (FFIs) to report to the IRS information about the accounts of US citizen.
FFIs that fail to comply with this rule will be required to pay 30 percent withholding tax for the US-sourced income placed by US citizens in the FFIs.
Purisima said signing of the IGA “underscores the growing international cooperation to curb offshore tax evasion and avoidance.”
It also solidified the country’s bid to further promote fiscal transparency in Asia Pacific, he said.
“In fact, fiscal transparency is one of the four pillars of the Cebu Action Plan (CAP) the Philippines is advancing in its hosting of the Asia Pacific Economic Cooperation (APEC) Finance Ministers’ Process (FMP) meetings,” he disclosed.
“Tax evasion across borders is an alarming problem that we can beat back with openness and mutual cooperation. This IGA is an affirmation of that ideal,” he added.
Relatively, Goldberg said signing of the IGA “marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion — an objective that mutually benefits our wwo 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,” he added.
Before FATCA, the two countries has a treaty that allows for an Exchange of Information on tax cooperation but the information can only be provided upon request of a party.
On July 1, 2013, the Bangko Sentral ng Pilipinas (BSP) issued a Memorandum urging banks to comply with the FATCA rules to prevent being sanctioned.
Even if the BSP will not penalize banks for non-compliance on FATCA rules BSP Governor Amando Tetangco Jr. said the central bank will continue “to direct banks to take measures, should non-compliance result in unfavorable consequences on the operations of banks.”
”The BSP’s actions would be more on working to encourage banks to establish systems that they would need to enable them to comply with the FATCA requirements,” he said.
Earlier, the BSP chief said Philippine banks’ compliance to the FATCA rules is based on the banks’ business decision. (PNA)