CALOOCAN CITY, Sept. 19 (PIA) -- The Bureau of Internal Revenue (BIR) has assured senators of its full support for the proposed Financial Institutions Strategic Transfer (FIST) Bill that aims to allow banks to dispose of their bad loans and other non-performing assets (NPAs) through would-be asset management companies, which, in turn, will enable them to offer a steady flow of credit to businesses hit hard by the coronavirus-induced global economic downturn.
BIR Commissioner Caesar Dulay gave this assurance during a recent joint hearing of the Senate committees on banks, financial institutions and currencies and on ways and means.
Dulay told senators he had also sent a letter to Senator Grace Poe, who chairs the banks committee, formally manifesting the BIR's support for the proposed bill, which is one of the measures backed by the Department of Finance (DOF) as part of the government's economic recovery program.
"While we have stated also that the tax incentives may affect our revenues in terms of foregone revenues, on the balance, we believe that the objectives of the bill will far outweigh the effect on our revenue collections," Dulay said during the recent Senate joint hearing on the proposed FIST bill.
The Senate ways and means committee is headed by Sen. Pia Cayetano.
In his letter to Poe, Dulay reiterated the BIR's support for the FIST bill and offered the bureau's assistance to the Senate by way of providing financial data relevant to the ongoing deliberations on the measure.
"Finally, we are one with the DOF, Bureau of the Treasury (BTr), Bangko Sentral ng Pilipinas (BSP) and other government agencies (in) calling for the immediate passage of the FIST bill as we are confident that it will greatly contribute towards the stabilization of the Philippine financial system," Dulay said in his letter.
Dulay pointed out in his letter that the tax incentives provided under the FIST bill "should not be perpetual but time bound."
He also cited the sufficient safety measures under the FIST bill, such as "the imposition of penalties and administrative sanctions in case any person violates any of its provisions."
In his letter, Dulay also assured Poe that once the FIST bill is passed into law, the BIR would swiftly act on the issuances necessary to effectively implement its tax provisions.
During the hearing, Dulay also restated the BIR's commitment to act quickly on the FIST Act.
"Once the law is approved, we will see to it that the revenue regulations and the IRR (implementing rules and regulations) will be issued out, maybe within the next six months," Dulay said during the hearing.
Senate Bill (SB) No. 1594 or FIST aims to create specialized asset-managing firms that would acquire "bad loans and stagnant properties" from distressed financial institutions.
The House of Representatives earlier passed its version of FIST-House Bill (HB) No. 6816-before the sine die adjournment of the Congress in June.
President Duterte described the FIST bill during his 5th State-of-the-Nation Address (SONA) as a key component of the government's plan to recover from the pandemic-induced crisis, and urged the Congress to act swiftly on the measure.
Finance Secretary Carlos Dominguez III has pointed out that swift action to preserve the asset quality of banking institutions will ensure the continued strength of the financial sector, which, in turn, will help the economy recover faster from the global health and economic crises spawned by the pandemic.
Dominguez said during the same Senate joint hearing that the FIST bill will guarantee a steady source of credit for the pandemic-hit sectors of the economy while providing safeguards to consumers.
The proposed asset management companies under FIST is an "improved version" of the special purpose vehicles (SPVs) provided under a 2002 law passed by the Congress to stem the economic damage from the 1997 Asian financial crisis that lasted till the early 2000s, Dominguez said.
Under the FIST Act, allowing banks to outsource the management of their non-performing assets to asset management companies will enable them to focus on what they do best, which is their primary task of lending to sectors in need of credit, Dominguez said.
FIST will also encourage the private sector, government financial institutions (GFIs) and government-owned or -controlled corporations (GOCCs) to help rehabilitate distressed businesses, he added.
The measure provides tax incentives to defray the transaction and transfer costs of non-performing assets to asset management companies.
Dominguez said this would entail foregone revenues of between P3.3 billion and P13 billion every year for the next five years to clear the books of banks of bad debts, and to keep the economy going.
"We believe that the economic benefits of strengthening the financial sector through this effort outweigh the fiscal costs of doing so," he said. (PIA NCR)