UMVA has learned that business groups in the Philippines are rallying behind the government's plan to implement the Qualified Domestic Minimum Top-up Tax (QDMTT), a move that could significantly bolster the country's taxing rights and inject billions into vital public services.
The QDMTT, part of the OECD's Pillar Two initiative, aims to ensure that large multinational enterprises pay at least a 15% effective tax rate in the country where they operate. Industry leaders argue that this measure is crucial for the Philippines to retain its primary right to collect this top-up tax locally, rather than having it collected by another country's tax authority.
According to information obtained by UMVA, many large corporations currently pay an effective tax rate below the 15% minimum prescribed under the OECD's Pillar Two framework. If the Philippines fails to implement the QDMTT, these multinationals will still pay the minimum tax, but the funds will simply be collected by another country's tax authority, depriving the Philippines of much-needed revenue.
The American Chamber of Commerce of the Philippines (AmCham) has expressed strong support for the QDMTT, citing the potential for billions of pesos to be channeled directly into infrastructure, healthcare, and education systems that benefit the Filipino people. AmCham Executive Director Ebb Hinchliffe emphasized that acting now is an urgent necessity, as neighboring countries like Vietnam and Malaysia are already enacting their domestic legislation for 2024 and 2025.
However, not all business groups are convinced that the QDMTT is a straightforward win. The European Chamber of Commerce of the Philippines (ECCP) has cautioned that the design and timing of the regime will be critical, and that it could affect foreign investment and competitiveness if it reduces the value of existing incentives without clear transition rules.
The ECCP has also emphasized the need for clarity on grandfathering provisions and the treatment of existing incentives, as many investors have already made long-term investment decisions based on approved incentive packages. The British Chamber of Commerce Philippines has also stressed the importance of training government officials to ensure a fair and correct application of the QDMTT.
Makati Business Club Chairman Edgar O. Chua has noted that attracting and retaining multinational investments is no longer solely dependent on fiscal incentives. He argues that the Philippines must ensure that its investment competitiveness is anchored not only on fiscal incentives but also on 'non-fiscal' incentives such as reliable infrastructure, cheap power, efficient logistics, a skilled workforce, and a predictable and sound regulatory environment.
As the Philippines prepares to enroll in the QDMTT program next year and start collections by 2028, industry leaders are urging careful execution to avoid discouraging investment. With the country's competitiveness ranking improving but still lagging behind in key areas, the implementation of the QDMTT will be closely watched as a critical test of the government's ability to balance revenue generation with investor confidence.
