Fourteen business groups led by the Bankers Association of the Philippines on Friday released a statement asking the government to honor its original commitments when it sold the so-called PEACe bonds to banks a decade ago.
“We, the members of the business community, would like to express our support for the group of investors in upholding the principles that serve as the foundation for the financial services industry, serving big and small investors,” they said in full-page ads published in two national newspapers.
Apart from the BAP, the groups included the Makati Business Club, the Management Association of the Philippines and the Chamber of Thrift Banks.
Citing the need to keep the sanctity of contracts, the groups pointed out that “contractual commitments arising from government securities should at all times be held sacrosanct and inviolable by the government.”
The dispute between the country’s financial community and the government arose from the decision of the Department of Finance and the Bureau of Internal Revenue to impose a 20-percent final withholding tax on the proceeds of the Poverty Eradication and Alleviation Certificates or PEACe bonds a few days before the issue matured two weeks ago.
Bankers insisted that the PEACe bonds were marketed to them a decade ago by the government as “not being subject to the final withholding tax” (although they are not, strictly speaking, tax exempt since banks would still have to pay taxes on the proceeds later).
A group of banks have since petitioned the Supreme Court to enjoin the Bureau of the Treasury from withholding 20 percent of the proceeds and an injunction has been issued by the high tribunal pending its resolution.
In Friday’s statement, the bankers added that investors should also “be protected from changes in regulation, including those arising from retroactive application of changes in tax rulings, to help gain and maintain investor confidence in our capital markets.”