Capital flight fears over alphalist rule ‘undue’

Posted on October 27, 2014

CAPITAL FLIGHT concerns over regulators’ move to tighten withholding tax reporting are unfounded, Finance Secretary Cesar V. Purisima said on Friday, disputing business groups that said the stricter rule has turned investors away.

Cesar V. Purisima -- BW File Photo
In a Finance department statement released last Friday, Mr. Purisima was quoted as saying that facts do not support the concerns of top officials of nine business groups that Revenue Regulations (RR) 1-2014 has triggered capital flight in Philippine markets.

“Ten months since the amendment took effect, relevant indicators show that the regulation has produced none of the negative effects feared by investors,” Mr. Purisima was quoted as saying in the statement.

“In fact, the Philippine Stock Exchange is maintaining its all-time high; the monthly inflow of foreign portfolio investments has surpassed outflow since April this year,” he added.

“The facts simply do not support the undue fears being raised.”

Officials of nine major business groups, in a July letter to Finance authorities, pressed for revocation of RR 1-2014, as well as Revenue Memorandum Circular (RMC) 5-2014 and Securities and Exchange Commission (SEC) Memorandum Circular (MC) No. 10 series of 2014.

RR 1-2014 requires withholding agents to submit an alphabetical list (alphalist) of employees and list of payees baring income subject to creditable and final withholding taxes. It likewise prohibits lumping such amounts into a single total labeled as “various” accounts.

RMC 5-2014, on the other hand, requires withholding agents to indicate taxpayer identification numbers (TINs), complete names, income amounts and tax withheld from payees.

SEC MC 10-2014, meanwhile, sets guidelines to help issuers of securities comply with RR 1-2014.

With the authorities standing by these issuances, the business groups then sought a review of the issuances before the Supreme Court, citing violations to their right to privacy and due process.

The high court, acting on the business groups’ plea, issued an indefinite temporary restraining order against the prohibition to lump withholding taxes from dividend payments under the PCD Nominee Corp. -- Mikhail Franz E. Flores