Slowdown in lending feared if banks held liable for tax cheats

Bank officials fear a slowdown in lending activities after Justice officials declared that banks will be liable for borrowers who cheat on their taxes. Bank lending growth is currently 12 percent. Some bankers feared it will be muted in the months ahead if the finance and justice departments would prosecute banks as accomplices when they grant loans to tax evaders. The Department of Justice (DOJ) said on Monday that it will run after bank officials who conduct business with tax evaders, including those who extend loans to taxpayers keeping multiple books of accounts. Bank officers who extend loans to tax cheats will also be held liable for violation of the National Internal Revenue Code, Justice Secretary Leila de Lima said. However, bank executives, who refused to be identified, said there could be a slowdown in lending as loan officers would have to distinguish tax evaders from those who are not. Fear-mongering Finance Secretary Cesar Purisima, however, criticized bankers, saying that the move to prosecute banks who lend to tax cheats would not dampen bank lending down the line. Purisima, who also sits at the Monetary Board of the Bangko Sentral ng Pilipinas, said the legal stance of the Justice officials would not influence bank lending, which is now enjoying robust growth. “That is fear mongering," Purisima said. The legal stance would not impact bank lending because the demand continues to be felt across the economy, he said. Banks also continue to report rising business volumes, the finance chief added. He also said there is no existing study showing that potential imprisonment will deter greater bank lending in the future. He also reminded bank officials that they “do not have the liberty to make judgment on illegal matters." “We have laws in this country and everyone is supposed to obey the law. I don’t think you are allowed to make a judgment on whether you obey the law or not. If you are caught, then you just have to pay the penalty for it," Purisima said. Liable under the tax code De Lima earlier said officials of banks, lending or financial institutions who deliberately assist tax evaders could be held criminally liable under the National Internal Revenue Code (NIRC) or the Tax Reform Act of 1997. Section 253 of the NIRC states that any person who willfully assists in the commission of a crime penalized under the tax reform law “shall be liable in the same manner as the principal." “Thus, when a responsible banking, lending or financial institution officer grants loans to a person even as he fully knows that the person keeps multiple books of accounts, which is clearly prohibited by the NIRC, the officer is equally guilty of the crime committed by the loan grantee," De Lima said. De Lima also said that Republic Act 8791 or the General Banking Law of 2000 prohibits bank officials from engaging in any fraudulent transaction. The law also bars borrowers from submitting false documents or resorting to misrepresentation to obtain, renew, or increase a loan. –DM/VVP, GMANews.TV