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AFTER
initially balking at the prospect, the Bangko Sentral ng
Pilipinas (BSP) finally agreed to act as tax collector
for the government in all sales of government securities
(GS) to banks and financial institutions amounting to
billions of pesos.
In an
interview, BSP Governor Amando Tetangco Jr. said on
Friday they agreed to withhold the equivalent of 20
percent on all GS sales on behalf of the Bureau of
Internal Revenue (BIR) starting August 22 this year.
But
while the banks offer no resistance to withholding 20
percent of the value of their reverse repurchase
transactions with the BSP on the set date, they balked
at the prospect of having to pay withholding tax as well
from the start of the year up to August 21, according to
Tetangco.
“They
have a request that we are studying. The banks asked
that the final withholding tax be not retroactive,” he
told reporters on Friday.
Retroaction is potentially painful for the banks, who
stand to pay P3 billion to the BIR. The revenue agency
had insisted early on that it be paid the long overdue
amount.
According to Tetangco, he already told the banks they
will have to pay the 20-percent tax withheld on all
their reverse repo purchases with the BSP since the
start of the year up to the day before the effectivity
of the BIR circular on August 22, 2008.
“We said
we will also collect the taxes that should have been
paid since the first business day of the year up to
August 21. The banks pleaded for nonretroaction and that
is what we are studying at the moment,” he explained.
He added
the industry associations affected by the 20-percent
withholding tax on all reverse repo transactions all
pleaded for nonretroaction.
He could
not say for certain the completion date of the BSP
study.
The BIR
previously levied the BSP P9 billion in final
withholding tax as well as gross receipts tax (GRT) on
reverse repo sales to banks and financial institutions
from 2004 to 2007.
Reverse
repos represent the borrowing tools of the BSP, by which
it influences the level of peso liquidity in the system
in pursuit of a monetary goal— in this case a degree of
reduction consistent with a given inflation goal.
The BSP
earlier tried to justify its reluctance to withhold the
tax for the BIR by the essentially monetarist nature of
the transactions.
In the
end, the BSP reached a compromise stance and agreed to
pay the BIR 40 percent of the assessed amount, or P3.6
billion.
Of this
amount, P3 billion represented the final withholding tax
on those transactions and the P600 million the GRT. |
