The Supreme Court on Tuesday issued a temporary restraining order on the implementation of a Bureau of Internal Revenue ruling that would have collected up to P5 billion in taxes on the Poverty Eradication and Alleviation Certificates, or PEACe bonds.
“A TRO is being issued enjoining the implementation of BIR Ruling No. 370-2011 against the PEACe Bonds subject to the condition that the 20-percent final withholding tax on interest income therefrom shall be withheld by the banks and placed in escrow pending resolution of the petition,” Supreme Court spokesman Jose Midas Marquez said in a text message.
Marquez said the justices were unanimous in issuing the TRO and have required the respondents to file their comments.
Industry leaders Banco de Oro Unibank and Metropolitan Bank and Trust Co. led other lenders in asking the high tribunal on Monday to stop the government from imposing a 20-percent withholding tax on the maturing and supposed to be tax-free PEACe bonds.
The government was set to pay out a total of P35 billion to investors that acquired the securities. But P5 billion of this would return to state coffers in the form of taxes, if the BIR’s ruling was implemented.
The PEACe bonds were sold by the government during an auction on Oct. 16, 2001, raising P10.17 billion to fund poverty alleviation efforts.
Malacañang said Tuesday it was surprised by the ruling of the Supreme Court ordering banks to put in escrow the 20-percent withholding tax on the PEACe bonds until the high court settles the case.
Still, Presidential spokesman Edwin Lacierda said the review that President Aquino said he wanted done on the BIR’s October 10 ruling on the imposition of the 20-percent tax on the PEACe bonds would continue even with the high court resolution.
Asked whether the review would lead to the revocation of the BIR order, Lacierda said he did not know the “parameters” of the study.
Earlier Tuesday, the President said he would look into the bid of some banks to stop the BIR from imposing a 20-percent withholding tax on the maturing and supposedly tax-free “PEACe bonds.”
The President said he would meet with Finance Secretary Cesar Purisima and Revenue Commissioner Kim Henares to discuss the bid of several of the country’s top banks to stop the BIR’s collection of as much as P5 billion in taxes from the bonds.
The banks have petitioned the Supreme Court to issue a temporary restraining order on the imposition of the 20-percent withholding tax on the now 10-year-old bonds which matured Tuesday.
“We will then review this specifically to address the complaints of those who undertook the PEACe bonds,” Aquino told reporters.
Aquino also said he would also meet with members of the nongovernmental organization (NGO) community “who benefited” from the PEACe bonds and that he would talk to some of them “either (Tuesday) or within the week.”
But President Aquino also said that from what he understood, there were rulings by the BIR in 2004 that said the PEACe bonds were subject to the withholding tax.
The banks have asked the Supreme Court to issue a temporary restraining order and a permanent injunction on the withholding tax on the PEACe bonds. They accused the BIR of “grave abuse of discretion amounting to lack or excess of jurisdiction” when it issued a ruling last October 7, which said the PEACe bonds maturing (Tuesday) were subject to a 20-percent withholding tax.
The government is set to pay P35 billion to investors who bought the securities.