By Edu Punay (The Philippine Star) | Updated September 10, 2014 - 12:00am
MANILA, Philippines - The Supreme Court (SC) stopped yesterday the government from implementing its new policy requiring companies to fully disclose names and tax records of their shareholders.
The High Court issued a temporary restraining order (TRO) on the implementation of a key provision in Revenue Regulation (RR) 01-14 of the Department of Finance, Revenue Memorandum Circular (RMC) 5-2014 of the Bureau of Internal Revenue and the entire Memorandum Circular 10-2014 of the Securities and Exchange Commission.
The said order requires the submission of the tax identification number of the shareholders of companies listed alphabetically (alphalist) with their complete names and corresponding amounts of income and withholding tax.
The order also imposes penalties under the National Internal Revenue Code on violations.
The TRO is “effective immediately and until further orders” from the High Court.
The SC granted the immediate relief sought in the petition filed last Sept. 4 by the Philippine Stock Exchange (PSE), Bankers Association of the Philippines (BAP), Fund Managers Association of the Philippines (FMAP), Marmon Holding Inc., Philippine Association of Securities Brokers and Dealers Inc. (PASBDI) and Trust Officers Association of the Philippines (TOAP).
It also directed the DOF, BIR and SEC to comment on the petition within 10 days from receipt of notice.
In their 58-page petition, the business organizations asked the High Court to void the assailed orders.
They argued that the respondents violated their constitutional right to due process and right to privacy in issuing the orders.
They added that the SEC has no authority to issue circulars implementing or interpreting tax laws or issuances.
Lastly, they alleged that the assailed orders essentially amended Sec. 43.1 of the Securities Regulations Code as they prohibit the use of “PCD nominee” as the payee of the dividend payments and shareholder of shares in listed firms.
The petitioners said this violated the constitutional principle of separation of powers since only Congress has the power to amend laws.
The BIR said it needed such information to build a database it can use to improve analysis and enforcement of its tax assessment and collection duties.