Supreme Court asked to junk banks’ bid on bonds

The Bureau of Internal Revenue (BIR) has asked the Supreme Court to dismiss the petition of eight commercial banks questioning the collection of a 20-percent final withholding tax on the interest income from the government-issued Poverty Eradication and Alleviation Certificates (PEACe) bonds.

In a petition prepared by the Office of the Solicitor General (OSG), the BIR argued that the banks’ claim was flawed  with “serious procedural infirmities” since they did not exhaust administrative remedies before seeking the high court’s intervention.

Instead of running directly to the tribunal, Solicitor General Jose Anselmo Cadiz said, the petitioners should have first sought the position of Finance Secretary Cesar Purisima on the issue and the intervention of the Court of Appeals.

Omissions

“These omissions on the part of the petitioners are an obvious contravention of the doctrine of exhaustion of administrative remedies,” the OSG said.

It said the banks also broke the hierarchy of courts since there was “no impending danger or threat to the Philippine economy, as feared by petitioners, to allow them to directly seek relief” with the high court.

The OSG also insisted that the temporary restraining order (TRO) which the tribunal issued on October 18 “can no longer be implemented” because the PEACe bonds reached their maturity on that day.

At the time, the OSG said, the Bureau of Treasury had already withheld the 20-percent withholding tax as stated in the National Internal Revenue Code of 1997 and BIR Ruling No. 370-2011.

Moot

“As the TRO is already effectively moot, the same can no longer be implemented,” the OSG said.

The PEACe bonds were sold by the government at an auction on Oct. 16, 2001, raising P10.7 billion to fund poverty alleviation efforts.  At maturity, the government was to pay out a total of P35 billion to investors that acquired the securities. But P5 billion of this will return to state coffers if the BIR ruling was implemented.

In issuing the TRO, the high court directed the banks to put in escrow the withholding tax on the interest income from the bonds.