THE government will let the courts decide the controversy on whether a 20-percent withholding tax should be collected on the P35-billion Poverty Eradication and Alleviation Certificate (PEACe) bonds that matured on Tuesday.
But at the same time, Malacañang said it maintained the Department of Finance’s position on the bonds that were issued by the government in 2001.
“We will not file any pleading [in connection with the temporary restraining order imposed by the Supreme Court on the Bureau of Internal Revenue stopping it temporarily from collecting the tax]. It’s with the courts. We will let the courts decide it,” Secretary Ramon Carandang of the Presidential Communications Development and Strategic Planning Office said on Wednesday.
But Carandang also said: “We maintain the position that there is a tax liability. We went over the BIR [Bureau of Internal Revenue] opinion from 2001, and according to last opinion in 2004, there’s a tax liability,” he said.
President Aquino, Finance Secretary Cesar Purisima and Budget Secretary Butch Abad discussed the PEACe bonds issue in a meeting on Wednesday.
The Supreme Court on Tuesday temporarily stopped the government from imposing and collecting the tax and ordered banks that are holders of the bonds to withhold the amount and place it in escrow pending resolution of the case, court Spokesman Midas Marquez said.
As the issue raged on, a member of the Monetary Board (MB) chimed in, saying the issuance of the PEACe bonds was not necessary and that the recent decision of the Supreme Court to impose a TRO only highlights the obvious—that business rules in the Philippines are unpredictable.
“The PEACe bonds [case] is just one of these predictability issues,” MB member Felipe Medalla, also a former chief of the National Economic and Development Authority (Neda), told reporters at the sidelines of the Punongbayan & Araullo CEO Forum on Wednesday.
“People know the environment is like this. We hope, of course, that the policies will be more predictable. To begin with, why did we have them in the first place? One good way to be predictable is [to] do things right the first time so you don’t have to reverse yourself,” he said.
He said if the government only spent its funds better by implementing an infrastructure program that is P100 billion to P200 billion more than what it was spending 30 years ago, it would not have to resort to deal with “sweeteners” like the PEACe bonds.
The Philippines only spends around 2 percent to 3 percent of gross domestic product on infrastructure every year.
Medalla said adequate and timely infrastructure spending is necessary in the country’s pursuit of inclusive growth amid the global crisis that is causing economic and sovereign-debt problems in Europe and the United States.
If expenditures of government are only used more efficiently, he said even with low growth of around 4 percent to 6 percent and a deficit of around 2 percent to 3 percent of GDP, the country would still be able to lessen poverty and increase income equality.
While the government was able to increase funds for conditional cash-transfers, its revenues—or, in this case, savings—which was 47-percent bigger than what it was in 1995 could be used for other things that will bring about inclusive growth such as having strong maternal- and child-care programs and increasing quality spending for education and health.
“In short, the best way to “ride the shock waves” of the global crisis is to start doing things that we should have been doing a long time ago,” Medalla stressed.
The Asian Development Bank had warned of the possibility of a second global economic crisis, given the persistent and worsening economic troubles of the United States, Europe and Japan. This is the reason the Manila-based lender reduced its growth outlook for the Philippines to 7.5 percent from 7.8 percent in April. The 2012 projection was also lowered slightly to 7.5 percent from 7.7 percent previously.
