Central bank is not covered by gross receipts tax, says BIR

MANILA, Philippines - The central bank is not covered by the gross receipts tax (GRT), a business tax, since it is not engaged in business, the Bureau of Internal Revenue (BIR) said. In Revenue Regulations 8-2008 dated August 20, the tax bureau said the gross receipts tax imposed on the income earned by banks and non-bank financial intermediaries does not apply to the income earned by the central bank. Nelson M. Aspe, BIR deputy commissioner for operations, said RR 8-2008 was issued to clarify how the Bangko Sentral ng Pilipinas (BSP) should be taxed after a revenue district office in Manila proposed to assess the bank for unpaid taxes in a bid to collect more revenues. "Once and for all this will resolve the issue that the BSP is not a regular bank. It is not subject to a GRT," he told BusinessWorld. "The activities engaged in, and transactions undertaken by the BSP are geared towards the attainment of its constitutional and statutory mandates, and not in pursuit of commercial or business activities," the revenue regulation read. "Any revenues generated by the BSP from its operation will not transform such activities into a business undertaking. The GRT, being a tax imposed on the privilege to engage in business, is not imposable on the revenues generated by the BSP in the performance of its legally-mandated functions." The GRT, the tax bureau explained, is a low-rate business tax imposed on all income received by a business without any deductions for the costs of doing that business. Sections 121 and 122 of the National Internal Revenue Code, it said, specifies that banks, non-bank financial intermediaries performing quasi-banking functions, other non-bank financial intermediaries or financing companies must pay the GRT. Banks lend funds out of clients’ deposits while non-bank financial intermediaries lend funds or purchase receivables. The BSP does neither of these, the tax bureau noted. It was primarily set up not to engage in business but to see to it that prices are stable so that the economy will grow. "It shall also promote and maintain monetary stability and the convertibility of the peso," the tax bureau added. The central bank, it also said, is further tasked to supervise the banks and finance companies. If the BSP were forced to pay the GRT, its ability to implement its policies and carry out its functions might be affected, it said. "The imposition of the GRT on (the BSP’s) transactions might impact on its ability to implement monetary policies and to discharge its legally-mandated functions efficiently and effectively," the revenue regulation read. — Ruby Anne M. Rubio, BusinessWorld