THE PHILIPPINES may need to change the way it attracts investors as the Organization for Economic Co-operation and Development’s (OECD) Pillar Two framework, which establishes a 15% global minimum tax (GMT) on multinational enterprises, increasingly erodes the effectiveness of income-based incentives, a Congressional think tank said, according to BusinessWorld.
The Congressional Policy and Budget Research Department (CPBRD) said that with the GMT taking effect in many jurisdictions, the Philippines must reassess its fiscal incentives regime, which has long relied on income tax exemptions and reduced rates to lure foreign capital. The think tank noted that the new global tax rules could render such incentives less valuable for multinational enterprises, as any shortfall below 15% in host countries would be topped up by the enterprise's home jurisdiction.
The CPBRD recommended shifting toward non-income-based incentives, such as grants, subsidies, or improved infrastructure and regulatory conditions, to maintain competitiveness. The Philippines currently offers various fiscal incentives under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, but the GMT could undermine these perks for multinational firms covered by the OECD framework.