Davao City: The Department of Finance (DOF) said it is reviewing the bond issuances under the previous administration to avoid repeating its mistakes, particularly the zero-rated Poverty Eradication and Alleviation Certificates (PEAce) bonds 2011, which cost the government P1.4 billion in interest payments.
“It was an instruction to us to review the previous issuances, revenue regulations/memorandum
order/memorandum circulars, issued by the previous administration,” Finance Secretary Carlos Dominguez 3rd said during a business forum here.
“Let me give you a very costly regulation that was issued. You remember the zero-rated peace bonds? Now we have to pay P1.4 billion in interest,” he said.
The PEAce bonds were originally issued by the Bureau of the Treasury to RCBC Capital on behalf of the Caucus of Development NGO Networks (CODE-NGO), and subsequently sold in the secondary market that included eight petitioner banks.
Net proceeds from the bond sale were used to endow a permanent fund to finance accredited non-government organizations throughout the country.
Before the bonds matured, the bureau a ruling that imposed a withholding tax not only on RCBC/CODE-NGO but also on subsequent bondholders.
“So they withheld P4.9 billion in withholding tax. Of course the bank did not take this sitting down and went to court. And recently they won the case all the way up to the Supreme Court,” Dominguez noted.
“The Supreme Court said that we have to return the P4.9 billion which is fine. Anyway we used the money. But now we have to pay P1.4 billion in interest. So your last BIR [Bureau of Internal Revenue] Commissioner and the last Finance Secretary cost you at least P1.4 billion in taxpayers’ money. And I think that there are more cases of a similar nature which will come up soon,” Dominguez claimed.
The DOF chief has asked the BIR to revisit similar issuances to avoid burdening the public by collecting taxes that are not fair and will cause the government to lose in court and pay penalties and interests.
“And if it is unreasonable, then the mandate now is to review the regulation and be open to what is open to our, especially in the ease of doing business,” he said.