MANILA, Philippines—Business, banking and financial sectors on Thursday asked the Supreme Court to stop the implementation of a Bureau of Internal Revenue Regulation requiring the disclosure on stock payments, dividends and details about investors.
Petitioners are Bankers Association of the Philippines (BAP), Fund Managers Association of the Philippines (FMAP), Marmon Holdings, Inc., Philippine Association of Securities Brokers and Dealers, Inc. (PASBDI), Philippine Stock Exchange (PSE) and Trust Officers Association of the Philippines (TOAP)
Petitioners also want the high court to nullify Revenue Regulation (RR) 01-14, Revenue Memorandum Circular (RMC) No. 5-2014 and Securities and and Exchange Commission Memorandum Circular No. 10 Series of 2014.
RR 1-2014) requires withholding agents to submit an alphabetical list (“alphalist”) of payees on income payment subject to creditable and final withholding taxes. In the Revenue Memorandum Circular which clarified the provisions of RR 1-2014, it is required that withholding agents indicate in the alphalist the tax identification numbers (TIN), complete names, income amount and tax withheld from its payees.
In their petition for certiorari and prohibition, the groups told the high court that either way, they will face sanctions—noncompliance, the SEC will impose criminal and administrative penalties on them. It they will comply, they would also face the risk of being held criminally and civilly liable for violating the Data Privacy Act.
In their July, 2014 letter to Finance Secretary Cesar Purisima and BIR chief Kim Henares, they explained that the new requirement increased the cost of doing business, particularly for non-resident portfolio investors who are now forced to hire accredited tax lawyers to process their TIN applications.
Such measure, according to the position paper “discourages portfolio inflow and is likely to bring a setback to the Philippine capital market’s growth trajectory.
In fàct, the first half of 2014, the country experienced a decline of preferred shares traded, an early indication of capital flight where investors move to a country with investor-friendly policies.
Petitioners also said their right to due process was violated by the issuance of the regulation. Failure to comply would hold them criminally, administratively and civilly liable.
“This constitutes a violation of listed companies’ and their officers’ constitutional right against deprivation of liberty and property without due process of law,” the petition stated.
They added that the revenue regulation was implemented without prior consultation and hearing with the market participants.
“The requirement for listed companies and brokers to disclose the payees of dividends is void for being vague because in prohibiting listed companies and brokers from naming PCD nominees as the payee, the regulations effectively compel listed companies and brokers to speculate which should be considerred as the payee for purposes of complying with the regulations, again at the risk of incurring administrative and criminal liabilities under the Tax Code and the sections of the Securities and Regulations Code,” petitioners said.
The rule, petitioners added also contradicted the Data Privacy Act as it requires broker, dealers to disclose sensitive information of investors to listed companies without providing for any mechanism to protect the privacy of such information.
They added that the revenue regulation contradicted the state policy underr the Tax Code, SRC and Data Privacy Act which is the need to provide measures to achieve sustainable economic growth.
They also pointed out that the SEC has ho no authority to issue circulars implementing or interpreting tax laws or issuances.
The revenue regulation was issued on Dec. 17, 2013.
RELATED STORIES
BIR rule seen to trigger capital flight
Should I invest in dividend stocks?