Tax payments of forex buyers under scrutiny

BY FELIPE F. SALVOSA II, BusinessWorld Senior Reporter The Bangko Sentral ng Pilipinas has asked the Bureau of Internal Revenue (BIR) to make sure that those who buy foreign currency, particularly involving trade deals, have paid documentary stamps, in a bid to better monitor foreign exchange flows out of the country. In a Feb. 3 letter, Bangko Sentral Deputy Governor Diwa C. Guinigundo asked the BIR to issue new rules making banks responsible for ensuring that documentary stamp taxes (DST) are paid on foreign currency sold to clients before they are deposited to dedicated accounts in banks’ foreign currency deposit units, or FCDUs. An alternative, he said, is for the BIR to clarify that telegraphic transfers and orders of payment drawn from FCDU accounts for payments out of the Philippines are subject to DST, with the bank remitting the foreign currency requiring proof of payment prior to remittance overseas. Banks reportedly do not require proof of payment of DST on their customers’ orders of payment of money to offshore parties, such as for import obligations, if the funds come from FCDU accounts, Mr. Guinigundo said. "We are concerned that the BIR has already lost (and will continue to incur) substantial losses in the form of reduced DST collections," Mr. Guinigundo wrote BIR Commissioner Jose Mario C. Buñag. "The proposal aims to ensure that the appropriate DST is paid on subsequent telegraphic transfers and orders of payment of money drawn from the said client’s special/dedicated FCDU settlement account for payments out of the Philippines." Mr. Guinigundo added that losses would further increase once FCDU accounts are used to settle payments for non-trade obligations such as loans and investments. The Bangko Sentral official noted that the Bankers Association of the Philippines had sought such an arrangement on behalf of clients who "desire to stagger their purchase of [foreign exchange] to minimize pressures on the exchange rate." Aside from increasing tax collections, Mr. Guinigundo said the Bangko Sentral proposal would help promote "stability" in the foreign exchange market, "without having to worry about any possible negative consequences on the government’s tax collections."