Noy approves tax on Peace bonds

PALO, Leyte, Philippines – Collecting the 20 percent final withholding tax on the Poverty Eradication and Alleviation Certificates (PEACe) bonds is part of the government’s “duties and obligations,” President Aquino said yesterday.

“I think it is safer for us to implement the law from what we understand of it, rather than ignore implementing the law and be guilty of not fulfilling our obligations and duties,” Aquino told reporters here on the sidelines of the 67th anniversary of the Leyte Landing.

Aquino’s declaration came in the wake of the Supreme Court’s issuance of a temporary restraining order on the imposition of the withholding tax stipulated in Bureau of Internal Revenue Ruling No. 370-2011.

“It’s in the court right now and the courts will decide whose interpretation is correct,” Aquino stressed. He said BIR’s failure to collect the taxes may be tantamount to “dereliction of duty.” The government hopes to raise P5 billion from taxes on the PEACe bonds.

“The P5 billion the government is supposed to collect, I have no right to waive since it’s imposed by Congress,” the President said in Filipino.

He added it was way back in 2001, or during the Arroyo administration, that the PEACe bond offer was made.

He said he has been discussing the matter with BIR Commissioner Kim Henares and Finance Secretary Cesar Purisima.

The high court’s issuance of a TRO was in response to a petition filed by eight banks against the BIR’s collection of final withholding tax on the PEACe bonds, which matured last Oct.18, the same day the TRO was issued.

The petitioners were Banco de Oro, Bank of Commerce, China Banking Corp., Metrobank, Philippine Bank of Communications, Philippine National Bank, Philippine Veterans Bank and Planters Development Bank.

“Such unilateral imposition of the 20 percent final withholding tax on the interest/discounts realized on the government bonds only on the eve of its maturity with nary any prior consultation with the petitioners and other bondholders also amounts to confiscation of the petitioners’ property without due process,” the petitioners said.

The bonds were issued in 2001 upon the proposal of Code-NGO, which bought the bonds through the Rizal Commercial Banking Corp. in October 2001 for P10.17 billion, a discounted rate, with interest of 12.75 percent.

Under the proposal, Code-NGO would purchase the notes and sell them to investors. The estimated net proceeds of P1.45 billion would be used by Code-NGO for anti-poverty projects.

Bayan Muna Rep. Teddy Casiño earlier said Filipino taxpayers are paying P35 billion or P25 billion more than the P10 billion offer after a decade, or roughly P2.5 billion a year in interest.