DOF reviewing tax rules affecting banking system

The Department of Finance (DOF) is reviewing all tax regulations affecting the country’s banking and financial system. The review is expected to be completed by the end of this month.

Finance Secretary Jose Isidro Camacho, said they have been holding discussions with and receiving recommendations from representatives of the Bankers Association of the Philippines (BAP) and other private financial institutions.

"I want them to be clustered into similar issues, and then harmonize. I suspect that there are conflicting rulings," Camacho said yesterday in an interview during the induction of the new set of officers of the Financial Executives Institute of the Philippines (Finex).

BAP president and former Finance Secretary Cesar Virata said bankers are concerned over several new tax regulations including the much-anticipated expanded value-added tax or E-VAT.

Bankers are generally against the application of the E-VAT since it will increase their operating cost which will eventually be passed on to the clientele.

The BAP wants to know the proper application of the new tax ruling and the details of its application.

The industry is also concerned over the proposed issuance of a tax regulation on the capital note issues of banks.

"We have to strengthen the capital of the banks. Long term negotiable deposit helps to improve the liability patterns of banks versus the assets being held by each bank" Virata said.

The BAP is also concerned with issues related to the revaluation of banking assets, and the valuation of the subordinated notes to be issued by the special purpose vehicles (SPVs) or asset management corporations (AMCs).

President Arroyo last week signed into law Republic Act (RA) 9183, otherwise known as the Special Purpose Asset Vehicle (SPAV) bill, paving the way for the country’s banking system to market their bad debts aggresively.

However, the implementing rules and regulations (IRR) have still to be finalized as well as tax regulations affecting all transactions.