Close  

SC stops BIR from implementing ‘alphalist’ memo

/ 01:59 PM September 09, 2014

The Supreme Court. INQUIRER FILE PHOTO

MANILA, Philippines – The Supreme Court stopped the Bureau of Internal Revenue from enforcing its regulations requiring business, banking and financial sectors to submit an alphabetical list (alphalist) of portfolio investors receiving income payments and dividends.

“The Court issued a temporary restraining order, effective immediately and until further orders, stopping respondents from further enforcing or implementing RR 01-14 and RMC 05-14,” high court’s information chief Theodore Te said in a media briefer.

ADVERTISEMENT

At the same time, it ordered the Department of Finance, BIR and the Securities and Exchange Commission to comment on the petition filed by 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).

In their petition, they want the high court to nullify Revenue Regulation (RR) 01-14, Revenue Memorandum Circular (RMC) No. 5-2014 and Securities and Exchange Commission Memorandum Circular No. 10 Series of 2014.

RR 01-14 requires all withholding agents to submit an “alphalist” of payees on income payments subject to creditable and final withholding taxes and prohibit the lumping into a single amount and account of various income payments and taxes withheld.

As applied to dividend income payments by listed companies to their investors, these also prohibit listed companies from naming PCD Nominee Corp. (PCD)—the entity which holds the title of all uncertificated, or scripless, shares traded in the stock market—as the payee of dividends. This was interpreted by some listed companies, through their transfer agents, to require the disclosure of the names, addressed and tax identification numbers (TINs) of investors.

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. If 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 fact, during 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.

ADVERTISEMENT

“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 considered 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 under 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 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

Biz Buzz: ‘Alphalist’ class suit

Read Next
LATEST STORIES
MOST READ
Don't miss out on the latest news and information.
View comments

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Alphalist, Bureau of Internal Revenue, supreme court, taxpayers’ list
For feedback, complaints, or inquiries, contact us.
newsinfo

Orange rainfall warning raised in Zambales

September 16, 2019 10:18 PM

sports

Judo champion who defied Iran’s rules now in hiding

September 16, 2019 09:37 PM



© Copyright 1997-2019 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.