Govt rejects income tax exemptions for PDIC

MANILA, Philippines - The Department of Finance (DOF) rejected a proposal that intended to give tax exemptions to the state-led deposit insurer. The provision, contained in a draft law doubling deposit insurance to P500,000 per bank customer, may reduce the government’s tax collections, compromising its efforts to spend more to stimulate the economy. However, instead of a tax exemption, the Philippine Deposit Insurance Corp. (PDIC), could “apply for a tax subsidy corresponding to the amount of its tax liabilities such as the payment of income tax and value added tax," Finance Secretary Margarito B. Teves said in a memorandum. The deposit insurer may be given a tax subsidy if it “meets criteria" of the Fiscal Incentives Review Board, a body which can grant tax holidays and various other fiscal perks to companies and entities, according to Teves’ memorandum which was addressed to House Ways and Means Committee chairman Exequiel B. Javier. Under Teves’ proposal, PDIC’s tax obligations could be covered by the tax expenditure fund (TEF), a mechanism allowing agencies to eliminate tax payments to the national government. “We believe the PDIC, in the course of providing deposit insurance and collecting assessment fees, is not engaged in what is normally regarded as ‘sale of goods and services’ nor in the conduct of a trade or business with a profit motive," Teves’ memorandum said. From 2000 until September 2008, PDIC paid some P13.22 billion in income and value-added taxes, money that could be better used to strengthen the agency so that it could better shield depositors from the effects of bank failures. Starting this year until 2013, the agency expects to pay at least P2.71 billion a year in taxes, said PDIC President Jose Nograles, a brother of Prospero, House Speaker and Davao Representative. - GMANews.TV