SCRUTINY. Committee on Foreign Relations chair Senator Imee Marcos asks representatives of government agencies about the benefits of the Double Taxation Avoidance agreement between the Philippines and Brunei during a Senate hearing on Tuesday (April 25, 2023). Marcos' panel will study the agreement further before bringing it to the Senate plenary for concurrence. (Courtesy of Senate-PRIB)

MANILA – The Senate Committee on Foreign Relations on Tuesday opened discussions on the Double Taxation Avoidance (DTA) agreement that was signed by the Philippines and Brunei Darussalam on July 16, 2021.

The agreement seeks to eliminate double taxation and deter tax evasion on the income generated from cross-border transactions.

It is also expected to encourage the transfer of technology and skills between the two countries.

Senator Imee Marcos, who chairs the committee, stressed the need for the Philippines to weigh the pros and cons of entering into the agreement, even as she noted that such treaties will promote international trade and investments.

Marcos specifically inquired about the benefits that the Philippines is expected to reap from the deal, citing the current product exchanges between the two countries.

"Lumalaki ang ating negative trade balance sa kanila eh, di ba? Pabaliktad. Nung dati, sila ang bumibili sa atin pero ngayon sa pangangailangan natin sa langis at sa iba't iba pang mga produkto ng langis ay talagang lumolobo na ‘yung binibili natin sa kanila (Our trade balance deficit with them is getting bigger, right? It's the opposite. Before, they are the ones who buy from us but now because of our need for oil and other petroleum products, what we buy from them got really bigger)," she noted.

Ryan Romeo Perez, Board of Investments Legal and Compliance Division chief, revealed that there are minimal investments coming from Brunei companies in the Philippines but noted that it is more on the professional, scientific and technical activities.

"If all investment promotion agencies, including [the Department of Trade and Industry] DTI, will aggressively promote certain industries and sectors, perhaps we can improve on our exports on our certain commodities,” Perez said.

Marcos, however, is looking forward to the DTA intensifying the cooperation between the two countries' halal (Islam permissible food) sectors.

"I think this is very interesting considering that there is an existing memorandum of understanding to explore opportunities and since we know fully well that halal products here in the Philippines are inordinately expensive, sometimes triple or quadruple the price of regular food," she added.

The lawmaker said around 145 million Muslim tourists from the Association of Southeast Asian Nations (ASEAN) and Middle East could potentially come to the Philippines if income tax of travel agencies and other operators will be reduced.

All the government agencies concerned, including the Department of Finance (DOF), concurred with every provision of the DTA.

Dir. Emee Macabales of DOF explained that the DTA will allow for the affirmation of the country's commitments with other ASEAN countries especially on the form of taxation.

"This will also complement our existing agreements with other ASEAN countries. To date there are five. And so, we hope to add the DTA with Brunei to that," Macabales said.

She recalled that the PH-Brunei DTA was originally negotiated as early as 2001 and was revisited in 2010.

If the Senate will be able to ratify the agreement this year, the Department of Foreign Affairs (DFA) will inform the Brunei's Ministry of Foreign Affairs which signal the start of its implementation on Jan. 1, 2024.

According to the records of DFA, there are currently 20,100 overseas Filipino workers in Brunei who are mostly professionals and 1,700 are working as domestic helpers.

The PH-Brunei DTA, which is the Philippines' 44th DTA to be signed, shall apply to persons who are residents of one or both of the contracting states and to taxes on income imposed on behalf of a Contracting State irrespective of the manner in which they are levied.

According to a previous statement by former Finance Secretary Carlos Dominguez III, the agreement will strengthen economic cooperation and enhance investment flows and economic activity between the Philippines and Brunei.

Dominguez further said by addressing the adverse effects of double taxation, the agreement can help bring in more foreign direct investments from Brunei or find more jobs there for Filipinos. (PNA)