Press Release February 12, 2018
Sponsorship Speech of Senator Loren Legarda
Mr. President, I have the honor to seek approval of three Double Taxation Avoidance Agreements (DTAAs), namely:
These Double Taxation Avoidance Agreements 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. These agreements are also intended to permit the Contracting States to better enforce their domestic laws so as to reduce tax evasion. To promote cross-border trade and investment, these agreements seek to (1) allocate taxing jurisdiction so as to avoid double taxation; (2) reduce source-State taxation; (3) prohibit discrimination based on alienage, foreign organization, or foreign ownership; and (4) promote resolution of situations in which the income taxable by one Contracting State as opposed to the other Contracting State is in question. With regard to better enforcing domestic tax laws, these treaties also provide that Contracting States exchange information under the Exchange of Information article. This is necessary since the tax systems of most countries rely to a very large extent on voluntary compliance, which leaves room for abuse. Thus, it is important that a Contracting State be able to obtain from its treaty partners information about persons and activities subject to taxation in that State. The DTAA with Thailand is a renegotiated Agreement. Upon entry into force of the renegotiated Convention, the existing Convention between the Philippines and Thailand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Tax Income, which was signed on July 14, 1982, will terminate and cease to have effect. The DTAA with Mexico seeks to deepen the Philippines-Mexico economic relations, which finds its roots in the Manila-Acapulco Galleon Trade, by enhancing cooperation on tax matters. Meanwhile, the DTAA with Sri Lanka would help both nations not only in improving bilateral trade relations, but also to further their respective economies, allowing both nations to closely identify with all developing countries, as well as strengthen ties with South Asian countries. Mr. President, As a developing country, the Philippines' lowering of income tax rates or even not imposing such taxes under certain instances with respect to income derived by non-residents (individuals and legal persons) may in effect encourage the flow of capital, technology, equipment, and services in our country. When there is a sufficient supply of capital or foreign currency in the country, this may translate into lower interest rates and more companies will be encouraged to expand their businesses or purchase equipment, raw materials, and even services from foreign suppliers. Moreover, when intangible properties like patents and know-how and equipment are leased by non-residents to domestic companies in the Philippines, this means more products will be developed in the country, thus, reducing the need to import such products. Further, when services are encouraged to take place in the country, this means more economic activities and increased transfer of technology. It is for these reasons that your Committee on Foreign Relations respectfully urge the Senate to concur in the ratification of these treaties. Thank you. |
Thursday, April 18
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