PSE NEWS RELEASE
August 4, 2014
Business and Industry groups seek revocation of BIR Rule on alphalist requirement
Nine groups in the business, banking, and financial sectors are asking the Bureau of Internal Revenue (BIR) to revoke Revenue Regulations 1-2014 (RR 1-2014) which requires withholding agents to submit an alphabetical list (“alphalist”) of payees on income payment subject to creditable and final withholding taxes. In the Revenue Memorandum Circular which clarified the provisions of RR 1-2014, it is required that withholding agents indicate in the alphalist the tax identification numbers (TIN), complete names, income amount and tax withheld from its payees.
In an industry position paper, the signing organizations cited several reasons for the revocation request. Foremost among the reasons is that the revenue regulation violates existing legal requirements as consultations with the concerned parties were not held before the adoption of RR 1-2014. The Administrative Code of 1987 provides that if not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule. The regulation also violates the principle of uniformity in taxation as non-residents are allowed to get a TIN until November 2014 but no such extension was given to domestic investors like retirees, housewives, and students.
According to Miguel Varela, Chairman of the Philippine Chamber of Commerce and Industry, “We are one with the groups that signed this position paper in acknowledging that this regulation could undermine the growth that the local capital markets has been experiencing in the past years. We are hoping that the Finance Department and the BIR will reconsider this issuance”.
The position paper mentioned capital flight as a repercussion of the implementation of RR 1-2014. Experience shows that investors opt to go to markets which offer attractive investment returns and investor-friendly policies.
“Clearly, RR 1-2014 disregards basic laws and guidelines that were established to protect investors. We are starting to experience the negative effect of this regulation on the stock market and obviously, this setback is not something we can afford to have at this time when the Philippine equities market is generating so much interest from investors, especially foreign funds,” PSE President and CEO Hans B. Sicat said.
On average, foreign trades account for almost 51 percent of total Exchange trades.
The paper stated that if the BIR will indeed require issuers to identify the beneficial owners of stocks in the alphalist, full and immediate compliance with such measure will be virtually impossible because issuers do not have immediate access to the identities of their beneficial stockholders.
Since the effectivity of the regulation came a few months before the dividend season, some issuers chose to either withhold the release of the dividends or impose the maximum 30 percent withholding tax rate on investors who refused to give the personal information required by RR 1-2014 as a means to comply with what they perceive to be the requirement of the regulation and to shield themselves from possible tax liabilities.
The associations and business groups that signed the industry paper were the Bankers Association of the Philippines, Employers Confederation of the Philippines, Federation of Filipino-Chinese Chambers of Commerce & Industry, Inc., Fund Managers Association of the Philippines, Investment Houses Association of the Philippines, Philippine Association of Securities Brokers and Dealers, Inc., Philippine Chamber of Commerce and Industry, The Philippine Stock Exchange and Trust Officers Association of the Philippines.