MANILA, Philippines - The Bureau of Internal Revenue (BIR) on Tuesday dismissed fears by the business community that a new revenue regulation would discourage foreign investments and trigger capital flight from the country.
Several business groups earlier issued a statement warning of possible capital flight due to the BIR rule requiring the submission of an alphabetical list (alphalist) of payees of income payments subject to withholding taxes.
However, BIR chief Kim Henares said the requirement for the business, banking and financial sectors to withhold and provide alphalists have been in place as early as January 1997.
RR No. 1-2014 issued in December 17, 2013, which is now being questioned, requires taxpayers to list down each person to whom income payment was made. The BIR said lumping into one single amount (e.g. “various employees,” “various payees,” etc.) is prohibited and deductions for purposes of taxation will not be allowed.
"There was nothing new that was added in the regulations, we only made it stricter. Investors have nothing to fear if they are tax compliant," Henares said.
"Logic dictates that if you have a lot of money to invest, then you must have earned it and have paid the right taxes on your earning. Rest assured though that information in the hands of the BIR are confidential and cannot be disclosed without the approval of the President of the Philippines, under pain of imprisonment," she added.
The BIR once again reminded the business, banking and financial sectors that only bank deposits and government securities are protected by the bank secrecy law.
Under Section 2 of the bank secrecy law, all deposits of whatever nature in banks or banking institutions in the Philippines and investments in government bonds are absolutely confidential in nature.
Deposits refer to money or funds placed with bank that can be withdrawn on the depositor’s order or demand, such as deposit accounts in the form of savings, current and time deposits. Investments in government bonds refer include treasury bills, treasury notes, retail treasury bonds, dollar linked peso notes and other risk free bonds issued by the Philippine government.
The BIR noted that the bank secrecy law does not cover investments such as corporate bonds, purchases of shares of stocks, purchases of receivables of business, and purchases of foreign exchange.
"The rule is, interest income paid to bank deposits is subject to a final withholding tax. For those claiming exemption from taxes on interest income on deposits, they should prove that they are entitled to said exemption; otherwise, the said income is subject to the final withholding tax," the BIR stressed.