PH-France Protocol, the Philippines-Qatar Tax Treaty, and the
Philippines-Kuwait Tax Treaty
Senate of the Philippines
December 18, 2012
I have the honor to seek approval of Senate Resolution No. 919 under Committee Report No. 552 entitled, “Resolution Concurring in the Ratification of the Protocol Amending the Agreement between the Government of the Republic of the Philippines and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income”; Senate Resolution No. 920 under Committee Report No. 553 entitled, “Resolution Concurring in the Ratification of the Treaty between the Republic of the Philippines and the Government of the State of Qatar for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income”; and Senate Resolution No. 921 under Committee Report No. 554 entitled, “Resolution Concurring in the Ratification of the Treaty between the Republic of the Philippines and the Government of the State of Kuwait for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income.
While globalization brought about an increase in international trade, it also posed greater challenges to the effective enforcement of tax laws. Consequently, the role of international cooperation, as carried out through each country’s implementation of international standards of transparency and exchange of information for tax purposes, has become more and more critical.
These international standards set the need to exchange pertinent information required for the enforcement of the domestic laws of a requesting party. Said standards are reflected in Article 26 or the Exchange of Information provisions of the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention on Income and on Capital, approved by the OECD Council in July 2005.
Inclusion of the Philippines in the French Blacklist
Considering that the existing PH-France Treaty was signed on 9 January 1976 and took effect on 1 January 1978, Article 26 of the same is not, as yet, aligned with the text of the Exchange of Information provisions of the OECD Model Tax Convention. This is why the Philippines, to date, remains in the French Blacklist and has been listed as one of the non-cooperative countries and territories (NCCTs). French nationals are dissuaded from transacting with NCCTs because of the higher tax rates being imposed on them.
The PH-France Protocol, negotiated and concluded on 19 April 2011 in response to the inclusion of the Philippines in the French Blacklist of tax haven territories, simply amends Article 26 of the PH-France Treaty.
The revised first paragraph of Article 26 broadens the scope of the exchange of information requests that may be made. It now allows the exchange of information related to tax administration, including bank information.
Provisions common to Treaties with Kuwait and Qatar
The Treaties with Kuwait and Qatar likewise work toward the elimination of double taxation by allowing as credit the taxes paid or accrued under the laws of Kuwait against Philippine tax, subject to certain limitations. The treaties also include articles on non-discrimination, mutual agreement procedure and exchange of information, whereby the Contracting States can exchange necessary information, in particular for prevention of fraud or evasion of taxes covered by the Treaties.
As with all Double Taxation Agreements previously entered into by the Philippines, the Treaties with Qatar and Kuwait are intended to promote international trade and investment in several ways, the most important of which is by allocating taxing jurisdiction between the Contracting States so as to eliminate or mitigate double taxation of income. The provisions contained in these Treaties are already present in other existing Philippine Tax Treaties.
The benefits of tax treaties, especially to developing countries, cannot be gainsaid. They are intended to permit the Contracting States to better enforce their domestic laws so as to reduce tax evasion and they likewise promote technology transfer, and international academic, cultural and sports exchanges between the Contracting States.
In view of the foregoing, I respectfully urge this august body to concur in the ratification of these measures.
Thank you, Mr. President.