SC hints at 'show cause' order vs DOF, BIR on PEACe bonds

MANILA, Philippines - The Supreme Court (SC) hinted yesterday at a possible show cause order against the Department of Finance (DOF) and Bureau of Internal Revenue (BIR) for refusing to abide by the temporary restraining order (TRO) on tax coverage of the P35 billion worth of the controversial Poverty Eradication and Alleviation Certificates (PEACe) government bonds.

SC spokesman and Court Administrator Jose Midas Marquez said the high court is looking into why the DOF and BIR did not implement the TRO issued last Oct. 18 and have proceeded to collect the subject 20-percent final withholding tax (FWT) on the bonds that matured on the same day.

“With the admission that the Court’s temporary restraining order was not implemented, the Court can determine if at the time the order was issued and received, it indeed could no longer be implemented, and whether or not there was an intentional defiance of its order,” he said in a statement.

Marquez said once it is found that there was deliberate defiance of the TRO, the high court could cite the respondents in contempt.

“To ascertain the facts, the Court can always require any person or government official to show cause why he or she should not be held in contempt,” he warned.

Marquez issued the statement after the BIR and DOF denied defying the TRO even if they had admitted in their comment filed with the high court that the order was not implemented simply because they received notices one day late or last Oct. 19.

BIR Commissioner Kim Henares and Finance Secretary Cesar Purisima did not provide an alternative word for their action.

A TRO remains valid until lifted by the high court and means that only the court can declare its order invalid - not the respondent agencies.

Pending action from the court on the case, Marquez said the order should be implemented. He also dispelled fear of the agencies that following the TRO would possibly lead to criminal charges against their officials.

He said the executive department should respect the TRO.

“I think it has to be realized and accepted that we have three coequal branches of government, and the court is constitutionally mandated to settle disputes brought before it. Its orders and process will have to be respected and complied with, not only by the people, but more so by government officials,” he said in an interview with The STAR last Thursday.

Marquez said parties in a case before the high court should “avoid invoking technicalities to evade compliance (of orders), especially if compliance is still possible.”

The STAR reported last week that the DOF cited technicality as ground for not following the court order, saying the TRO came too late since the PEACe bonds already matured last Oct. 18 or the same day the order was issued.

It explained that the act of withholding the amount equivalent to the 20-percent FWT could no longer be enjoined since it was “already made by respondent BTr on the bond’s maturity date of Oct.18, 2011 inasmuch as no TRO was received on that day.”

“As the TRO is already effectively moot, the same can no longer be implemented,” it argued.

With this premise, the DOF explained that it could no longer comply with the court’s order and temporarily place the amount in an escrow account without violating Article VI Section 29 of the Constitution, which, “prohibits money being paid out of the treasury except in pursuance of an appropriation made by law.”

It also argued that implementation of the TRO would violate section 218 of the Tax Code in relation to section 11 of RA 1125, which prohibits courts - except the Court of Tax Appeals - from pursuing injunctions to restrain the collection of any national internal revenue tax imposed by government.

It then asked the high court to just dismiss the petition filed by Banco de Oro, Bank of Commerce, China Banking Corp., Metropolitan Bank and Trust Company, Philippine Bank of Communications, Philippine National Bank, Philippine Veterans Bank and Planters Development Bank last Oct. 17, a day before the bond matured.