Asked to comment on business groups’ opposition to Revenue Regulations (RR) No. 1-2014 and related issuances that require detailed reporting of payees’ income payments subject to creditable and final withholding taxes, BIR Commissioner Kim S. Jacinto-Henares said in a text message: “The requirement for an alpha list has been there since 1998; the only difference now is [we] made it clear you have to identify the income recipient with specificity and not defeat the law by lumping it in one account ‘various’.”
“If a person has been paying the right taxes, why should he be afraid?”
In a July 21 letter to Finance Secretary Cesar V. Purisima and Ms. Henares, top officials of nine major business groups pressed for revocation of RR 1-2014, Revenue Memorandum Circular (RMC) 5-2014 and Securities and Exchange Commission (SEC) Memorandum Circular (MC) No. 10 series of 2014 which clarified and provided guidelines, respectively, for the former.
Signatories were Hans B. Sicat, president and chief executive officer of the Philippine Stock Exchange (PSE); Lorenzo V. Tan, president of the Bankers Association of the Philippines; Edgardo G. Lacson, president of Employers Confederation of the Philippines; Miguel B. Varela, chairman of the Philippine Chamber of Commerce and Industry; Alexandra C. Deveras, president of the Fund Managers Association of the Philippines; Ismael G. Cruz, president of the Philippine Association of Securities Brokers and Dealers, Inc.; Robert B. Ramos, president of the Trust Officers Association of the Philippines; Senen L. Matoto, vice-president of the Investment Houses Association of the Philippines; and David O. Chua, vice-president of the Filipino-Chinese Chambers of Commerce & Industry, Inc.
RR 1-2014 requires withholding agents to submit an alphalist of employees and list of payees baring income subject to creditable and final withholding taxes.
It likewise prohibits lumping such amounts into a single total labelled as “various” accounts.
RMC 5-2014, on the other hand, requires withholding agents to indicate taxpayers identification numbers (TINs), complete names, income amounts and tax withheld from payees.
The SEC MC 10-2014, meanwhile, sets guidelines to help issuers of securities comply with RR 1-2014.
The business leaders argued that RR 1-2014 failed to define the term “payees,” a definition they find “significant.”
“Such definition is significant in the context of dividend payments because -- with respect to scripless shares of stock traded in the exchange -- there are three entities which may be considered as payees, namely: the PCD Nominee Corp., the depository participants (i.e. brokers and custodian banks), and the ultimate beneficial owners of the shares,” the letter read further.
It added that “BIR RR 1-2014 was interpreted by some listed companies... to require the disclosure of the names, addresses and TINs of investors.”
“As we have seen in the past months, this new requirement posed a problem because investors are being compelled to divulge private information,” the groups said in their letter, adding that “[i]t also increased the cost of doing business, particularly for non-resident portfolio investors who are now forced to hire accredited tax lawyers or agents to process TIN applications on their behalf.”
“This measure, at best, discourages portfolio inflow and is likely to bring a setback to the Philippine capital market’s growth trajectory.”
The groups also said first-half data have bared a decline in volume of preferred shares traded at PSE, “suggesting the early beginnings of capital flight which we fear will persist if the subject regulations continue to be implemented.”
“In the interest of sustaining the growth of the Philippine capital market, we urge the (Finance) department to revoke RR 1-2014, RMC 5-2014, and MC 10-2014,” the letter concluded.
In an accompanying report, the business leaders said they weren’t given an opportunity to be heard, citing RMC 20-86 that cites lack of public notice as a flaw in enforcement of tax laws and rules.
They also argued that “[b]rokers and custodian banks have a duty of confidentiality to their clients which they are committed to uphold.”
Sought for comment on Ms. Henares’ statement, PSE’s Mr. Sicat cited “a disconnect with how the capital markets work and how BIR thinks -- it’s still the 1960s as to ownership and beneficial ownership ...”
“Because funds own listed companies, the nth level beneficial owners of these local and global funds cannot be known and, hence, cannot be reported,” Mr. Sicat explained via text.
“The BIR put criminal liability on issuers who cannot comply, which is also a disconnect because the information they require is coming from investors who need to do so (disclose) voluntarility,” he noted.
“Because they cannot comply... they (BIR) are creating a situation where CFOs (chief financial officers) or CEOs (chief executive officers) of all listed companies could face jail terms by 2015,” he added.
“This is not right as issuers are law-abiding corporate citizens.”
FMAP President Alexandra C. Deveras said via separate text: “I cannot speak for the other business groups, but for FMAP, we shall continue our efforts for a dialogue with the DoF (Department of Finance) on the matter and we will welcome any other initiatives by the other business groups to address this matter.”
Lina P. Figueroa, a partner in accounting firm Punongbayan & Araullo, said by phone that the arrangement faces challenges, including lack of information on one-off transactions.
“I think the BIR wants too much information. They [sic] want to use that information to pinpoint those with suspicious activities,” she said. “In the process, taxpayers have a more difficult time in complying.” -- Mikhail Franz E. Flores with Daphne J. Magturo
source: Businessworld
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