THE DEPARTMENT of Finance (DoF) now estimates that the proposed qualified domestic minimum top-up tax (QDMTT) could generate an average of P24.4 billion in additional revenues annually under the global minimum tax (GMT) rules.
However, the DoF warned that the measure could weaken income-based tax incentives and make the Philippines’ broader investment environment more important to investors.
“If we pass it this year and the law is effective by Jan. 1, we can start collecting by 2029. There is a gap so that you are able to set your compliance,” Finance Assistant Secretary Euvimil Nina R. Asuncion said on the sidelines of a stakeholder briefing on Wednesday.
The DoF plans to implement the Philippines’ domestic component of the GMT through a proposed QDMTT law, allowing the government to collect locally the top-up tax due from in-scope multinational enterprise (MNE)groups.
Based on 2021-2024 data, the DoF estimated potential additional revenues of P32.5 billion in 2021, P21.2 billion in 2022, P25.6 billion in 2023 and P18.3 billion in 2024 or an annual average of P24.4 billion from the implementation of the QDMTT.
The DoF has tentatively set the QDMTT’s implementation for taxable year 2027. This would give MNE groups six months to register from the law’s effectivity, or from the end of the taxable year when they become in scope.
The first QDMTT return and the Global Anti-Base Erosion (GloBE) Information Return (GIR) would be due on or before the 18th month following the end of the first implementation year.
The proposed GMT rules would cover MNE groups with consolidated annual revenues of at least €750 million in at least two of the four preceding fiscal years and a jurisdictional effective tax rate below 15%.
According to the DoF, around 1,001 multinational groups fall within the scope of the GMT based on ORBIS data from 2021 to 2024. These groups operate 4,037 subsidiaries.
By jurisdiction of the ultimate parent entity, Japan accounted for the largest share of MNE groups at 24%, followed by the US at 22%, Germany at 7%, and the United Kingdom at 6%.
In terms of sectors, manufacturing accounted for 10.4% of the subsidiaries, followed by wholesale and retail trade and the repair of motor vehicles and motorcycles at 7.68%, and financial and insurance activities at 5.33%.
“Note, however, that these figures are based on currently available data and are still subject to more updating in the future,” Ms. Asuncion said.
However, Ms. Asuncion said that the GMT may affect the competitiveness of certain tax incentives being offered by the country.
“GMT may affect the competitiveness of certain tax incentives. Under the GloBE rules, the effectiveness of some incentives, particularly income-based incentives, may be reduced for in-scope multinational groups,” she said.
“If an incentive lowers the effective tax rate below 15%, the tax benefit may simply be offset by a top-up tax. In effect, the incentive may still be granted, but the benefit may no longer fully accrue to the investor,” she added.
The DoF identified income tax holidays, the 5% special corporate income tax and reduced corporate income tax rates among the incentives that could be affected, while enhanced deductions, Customs duty incentives and value-added tax incentives would not be affected.
Ms. Asuncion said the GMT would push the country to improve its competitiveness beyond tax incentives.
“As jurisdictions have less room to compete through low effective tax rates, investors will increasingly consider the overall quality of the business environment when deciding where to locate or expand,” she said.
“This includes the ease and predictability of doing business, infrastructure, logistics, energy costs, and others,” she added.
HIGHER EXCISE TAX
Meanwhile, the DoF on Wednesday proposed raising the excise tax on nonessential goods to 25% from 20%, based on the wholesale price or dutiable value.
The department also proposed to broaden its coverage to private aircraft, private recreational vessels such ash jet skis, speedboats, sailboats and motorboats and other high-end nonessential goods.
The proposal forms part of a tax reform package called Promoting Growth, Revenue, and Equity towards Socioeconomic Sustainability.
The department has yet to provide an estimate of the additional revenue from the proposal.
Collections from nonessential goods under the National Internal Revenue Code of 1997 totaled P307 million in 2025, down 27.9% from P426 million in 2024.
Under current law, the government collects a 20% tax based on the wholesale price or dutiable value of certain nonessential goods, including jewelry, perfumes and toilet waters, and yachts and other vessels intended for pleasure or sports.
The DoF also said its proposed higher excise taxes on sweetened beverages and tobacco and vapor products would have limited inflationary effects, although stakeholders raised concerns about the measure’s impact on small businesses and public health.
“I can’t remember the exact number, but it is very minimal, because in the food basket or the consumer price index basket, food [has] the largest [weight] and the largest [component] is rice,” Finance Undersecretary Karlo Fermin S. Adriano told reporters.
“For sweetened beverages and nonessential goods like tobacco and others, their share is small compared with the CPI basket.”
No lawmaker has sponsored the department’s proposed tax reform package yet, although several bills seeking to raise the annual income-tax-exempt threshold and remove the minimum corporate income tax for micro and small enterprises have been filed in Congress.
“There is no sponsor yet, but there are people who have already signified that they want to sponsor. We are just finalizing the details with them,” Mr. Adriano said.
Last month, the House Committee on Ways and Means approved the proposed tax relief measures. — Justine Irish D. Tabile