Businessmen question BIR regulation at SC-A A +A
Friday, September 5, 2014
BANKERS, businessmen and other players in the local bourse have opposed before the Supreme Court (SC) tax regulations that require detailed information on stockholders of listed companies, fearing these might be used for “fishing expeditions” against investors.
Asked to be declared unconstitutional by the SC are Department of Finance’s (DOF) Revenue Regulation No. 01-14 (RR 01-140), Revenue Memorandum Circular No. 05-14 (RMC 05-14), and Securities and Exchange Commission (SEC) Memorandum Circular No. 10, series of 2014.
These regulations direct listed firms to declare as payees of dividend payments made by listed companies the entities and individual investors, instead of the PCD nominee, which the businesses considered as the registered shareholder for the shares of stock on behalf of the investors.
The purpose of the regulations is to create a taxpayer database but the business groups said in a petition these will only allow the Bureau of Internal Revenue (BIR) "to delve into sensitive and confidential information (i.e. identity of the investor, tax identification number, address, total shareholdings, etc.) which can be used against investors."
The questioned regulations expressly require broker dealers to divulge sensitive personal information such as birth date (or age), status (residence and nationality) and TIN, to listed companies in order to allow these companies to comply with the questioned regulations.
However, petitioners noted that under Section 13(F) of the Data Privacy Act sensitive personal information may only be disclosed to a government entity if it involves a court proceeding or legal claim.
"Unlike government or public authorities, private third parties do not enjoy presumption of regularity in the performance of their functions and have no proprietary incentive in protecting the information provided to them on entities or individuals who are not their clients," the petition read.
None of the assailed regulations also provide for a mechanism that would guarantee the protection of the sensitive personal information required to be shared to the listed companies and/or its transfer agents.
The petition added that the regulations create a situation where a private investor and his/or broker may refuse the disclosure of the investor's personal sensitive personal information to the listed company, leaving the firm and its officials unable to comply with the regulation.
This exposes them to criminal prosecution for violation of the Tax Code and the Securities Regulations Code.
"Consequently, petitioners cannot comply with the questioned regulations without violating petitioners' constitutional right to privacy and without processing and disclosing personal information and sensitive personal information in violation of the Data Privacy Act," the petition stated.
Business groups, which are calling for the issuance of a temporary restraining order (TRO), also protested the lack of notice and consultation despite the fact that they were ones directly affected by the assailed regulations.
"Respondents, in the guise of tax administration, have jeopardized not only the stability of the Philippine capital market but also the liberty, properties, privacy and security of the market participants, which includes the petitioners," the petition read.
Finance Secretary Cesar Purisima, BIR Commissioner Kim Henares and SEC Chairperson Teresita Herbosa were named as respondents in the petition filed by six groups led by the Philippine Stock Exchange (PSE) and Bankers Association of the Philippines (BAP). (Sunnex)