BIR eases VAT collection on financial deals

Recognizing the difficulty of collecting the controversial 10-percent value-added tax on financial transactions and considering that there is pending petition for a court injunction, the Bureau of Internal Revenue (BIR) has somewhat relaxed the collection of the tax.

Per Revenue Memorandum Circular 19-2003 which was signed April 24 by Internal Revenue Commissioner Guillermo L. Parayno Jr., "any under-payment or over-payment resulting from said issues shall be paid for or credited to future VAT percentage tax payments or dues, without any penalty or surcharge."

The circular added that the first quarter VAT filing can be recorded manually for the time being which is a reversal from their preferred practice of electronic filing.

Yesterday, April 25 was the deadline for the filing of the VAT on all financial institutions which was made effective starting January this year under the National Internal Revenue Code (NIRC) and Revenue Regulations 18-99 and 12-2003.

Meanwhile, the Real Bank (A Thrift Bank) Inc. filed on April 22 a petition for a temporary restraining order (TRO) or preliminary injunction to stop the implementation of the VAT on financial institutions. The Quezon City Regional Trial Court, where the petition was filed, is expected to act on it by Monday.

Another thrift bank, The Anchor Bank is also expected to file a similar petition next week. "We are expecting more thrift banks to file the same type of petition soon," said Anchor Bank president Evangeline Escobillio.

The two thrift banks are members of the Chamber of Thrift Banks (CTB), the national organization of thrift and savings banks, development banks, and loan and savings associations.

Unconfirmed reports indicate that the Rural Bankers Association of the Philippines (RBAP) is poised to take a similar course of action.

"We have also sent our petition papers to members of Congress, both the lower and upper chambers," CTB executive director Suzanne I. Felix said. "We hope that next week we could hold a dialogue with them to clarify our positions."

In another development, Prudential Plans president Jose Alberto T. Alba said pre-need companies remain confused and are hesitant to apply the VAT on its products. Prudential Plans is one of the recognized industry leaders.

"We are still uncertain on how it will be applied to pre-need products while the industry is quite hesitant to pass on any increases in our operational costs on the premiums," Alba added.