SC orders BIR, DOF to explain defiance of TRO on PEACe bonds

MANILA, Philippines - The Supreme Court (SC) ordered yesterday the Department of Finance (DOF) and Bureau of Internal Revenue (BIR) to explain why they defied an order to stop collection of a 20-percent final withholding tax on P35-billion worth of Poverty Eradication and Alleviation Certificates (PEACe) government bonds.

SC spokesman and Court Administrator Jose Midas Marquez said once it would be found that the DOF and BIR deliberately defied the temporary restraining order (TRO), the respondents could be cited in contempt.

“The BIR and DOF are also directed again to comply with the TRO,” he said. “The principal purpose of the exercise of the power to cite for contempt is to vindicate the authority of the Court, preserve its integrity, maintain its dignity, safeguard its functions, and insure effectiveness in the administration of justice.”

The BIR and DOF have admitted they did not implement the TRO in a 137-page comment filed last Nov. 3.

However, the BIR and DOF denied defying the TRO because they received notice 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.

Marquez reiterated his call on the executive department to respect the TRO.

Parties in a case before the SC should “avoid invoking technicalities to evade compliance (of orders), especially if compliance is still possible,” he added.

The STAR earlier reported that the DOF and BIR cited technicality as ground for not following the court order.

“With due respect to the Honorable Court, its TRO dated Oct. 18, 2011 and received by the respondents on Oct. 19, 2011, could no longer be implemented, as the acts sought to be enjoined are already fait accompli (accomplished),” the agencies said.

They said the act of withholding the amount equivalent to the 20-percent final withholding tax could no longer be enjoined since it was “already made by the Bureau of Treasury 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,” the agencies said.

The DOF and BIR said they could no longer comply with the SC’s order and temporarily place the amount in an escrow account without violating the Constitution, which prohibits money being paid out of the treasury except in pursuance of an appropriation made by law.

The implementation of the TRO would violate the Tax Code in relation to Republic Act 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.

The DOF and BIR asked the SC to dismiss the petition of Banco de Oro, Bank of Commerce, China Banking Corp., Metropolitan Bank and Trust Co., Philippine Bank of Communications, Philippine National Bank, Philippine Veterans Bank and Planters Development Bank last Oct. 17, a day before the bond matured.

The DOF said the SC could order a tax refund in the event it rules in favor of petitioners.

Sources, however, said the subject final withholding tax remains intact at the Bureau of Treasury and has not yet been transferred to the BIR.