Taxman eyes multinational top-ups

With more than P50 billion in revenues being forgone due to the non-imposition of top-up taxes on large multinational enterprises (MNEs) in the Philippines, the Department of Finance (DOF) is eyeing to slap “very large” corporations with such a levy to contain the flight of potential tax earnings.

- DERCO ROSAL

Finance Undersecretary Karlo Fermin S. Adriano told the House committee on ways and means on Wednesday, Sept. 3, that besides the excise tax on single-use plastics (SUPs), general tax amnesty, and estate tax amnesty, the DOF is also pushing to legislate the qualified domestic minimum top-up tax (QDMTT) in the 20th Congress—another tax measure that will amass additional revenues from MNEs.

This comes as Finance Secretary Ralph G. Recto, himself a former legislator, urged senators last Tuesday, Sept. 2, to file bills designed to increase revenues instead of measures giving away dole-outs and freebies that would cost billions of pesos. Such moves, he said, could further reduce the national government's already meager fiscal space.

Adriano, who oversees the DOF’s fiscal policy and monitoring group, said the QDMTT stems from an Organization for Economic Cooperation and Development (OECD) rule requiring very large MNEs—those earning at least €750 million, or about P50 billion, in two of the past four years—to pay a minimum global tax rate of 15 percent.

If an MNE operates in the Philippines and pays less than the 15-percent minimum tax rate due to tax incentives, it will be required to settle the shortfall. This gap—such as paying only five percent and adding the remaining 10 percent—is what constitutes the top-up tax, according to Adriano.

For instance, since United Kingdom (UK)-based Unilever’s global income exceeds €750 million, if it pays less than 15 percent in taxes in the Philippines, it will be charged a top-up tax equal to the difference between the 15-percent minimum rate and what it actually paid in the country.