OECD Urges Philippines to Align Tax Incentives with GMT

MANILA, DDTCNews - The Organisation for Economic Co-operation and Development (OECD) is urging the Philippine government to reform its tax incentive scheme to attract investment in the mining sector. One key objective is to align the scheme with the implementation of the global minimum tax (GMT).

The OECD has advised the Philippine government to shift its tax incentive policy from income-based incentives to expenditure-based incentives. Income-based incentives include reductions in tax on profits or income earned by companies.

"The Philippines should consider shifting mining tax incentives towards expenditure-based measures, like accelerated depreciation and immediate expensing to entice investment," said the OECD, as quoted on Monday (14/9/2026).

For information, income-based tax incentives are granted by reducing tax on the income or profits earned by a company. Examples include tax holidays, tax allowances and reductions in the corporate income tax rate.

Expenditure-based tax incentives, on the other hand, are granted based on investments or costs incurred by a company. Examples include accelerated depreciation and immediate expensing.

The OECD had previously highlighted a number of issues relating to the critical mineral supply chains in the Philippines in a report. These issues encompass windfall gains, economic distortions and the effectiveness of income-based tax incentives.

At present, the Philippines provides tax incentives for value-added activities, such as refining and smelting in the mining sector. The mining sector contributes less than 1% to the Philippines' gross domestic product (GDP).

Given the scale of mining projects in the Philippines, the OECD recommends that the government implement accelerated depreciation to improve cash flow in the early stages of investment whilst also reducing taxable income during the initial investment payback period.

"Expenditure-based incentives can be useful for firms facing liquidity constraints, projects with high upfront costs and fixed assets," the OECD noted, as reported by Tax Notes International.

The OECD also considers expenditure-based tax incentives to be relatively more effective in boosting investment, including in the mining sector. Such incentives are also assessed as providing more value compared with income-based incentives.

Further, the OECD considers expenditure-based tax incentives to receive more favourable treatment and to be better aligned with the implementation of the GMT.

It should be noted that the global minimum tax applies to multinational enterprise (MNE) groups with a minimum global consolidated revenue of EUR750 million. The minimum effective tax rate agreed under the global consensus is 15%.

If the effective tax rate borne by an MNE group in a given jurisdiction is less than 15%, the group may be subject to a top-up tax. (dik)