MANILA: The Supreme Court has ordered the government to pay the P5-billion tax to holders of the Poverty Eradication and Alleviation Certificates (PEACe) bonds after it nullified the Bureau of Internal Revenue (BIR) rulings imposing a 20% final withholding tax on the government-issued bonds.
In a 45-page decision, the high court en banc said BIR Rulings No. 370-2011 and No. 378-2011 are unconstitutional and contrary to law. “Respondent Bureau of Treasury (BTr) is hereby ordered to immediately release and pay to the bondholders the amount corresponding to the 20 percent final withholding tax that it withheld on October 18, 2011,” the high court said. The PEACe bonds were originally issued by the BTr to Rizal Commercial Banking Corporation (RCBC) Capital, in behalf of the Caucus of Development NGO Networks (CODE-NGO), and subsequently sold to the secondary markets, including the eight petitioner banks–Banco de Oro, Bank of Commerce, China Banking Corp.
The petitioners and petitioner-intervenors sought recourse from the Supreme Court, which then issued a temporary restraining order (TRO) against implementation by the BTr of the BIR rulings. However, the government agency failed to comply with said order. “Thus, should it be found that RCBC Capital/CODE-NGO sold the PEACe bonds to 20 or more lenders/investors, the BIR may still collect the unpaid tax from RCBC Capital/CODE-NGO within 10 years after the discovery of the omission,” the high court said.
