Purisima Misinformed About the PEACe Bonds

It is unfortunate that Finance Secretary Cezar Purisima has reached his conclusion about the PEACe Bonds with incomplete and inaccurate information. The proceeds from PEACe Bonds was not created out of nothing – CODE-NGO and its partner RCBC paid the government P10.6B in 2001. The government through BIR changed the rules on October 7, 2011 – 11 days before the 10-year bonds matured – when it reversed three BIR rulings in 2001 which declared PEACe bonds were not subject to 20% tax. We reiterate that the PEACe Bonds was non-traditional, innovative measure to raise funds for poverty reduction projects of CSOs, the process was transparent and legal and the bonds were beneficial to Filipinos and the government.   

Finance Secretary Cesar V. Purisima has been quoted in newspaper reports today as saying that the Poverty Eradication and Alleviation Certificates (PEACe Bonds) “would not have reached first base under the Aquino Administration”.  He was further quoted to have said “You cannot create something out of nothing”.  He also said that “Everything has been subject to the 20 percent withholding tax except for the PEACe Bonds”.
 
It is unfortunate that Sec. Purisima has reached his conclusion about the PEACe Bonds with incomplete and inaccurate information.  We understand however that his heavy workload and the intense pressure on him as Finance secretary and head of the Economic Cluster of the Cabinet may have prevented him from devoting more time to study the PEACe Bonds transactions which occurred ten years ago in 2001.
 
We would just like to make the following clarifications related to his statements:
 
a)      The proceeds from the PEACe Bonds were not created out of nothing. CODE-NGO and our partner bank RCBC paid the government P10.16 Billion in 2001; this was the net present value at that time of the P35 Billion zero-coupon bonds sold by the government through a public auction where RCBC and 14 other banks/government securities eligible dealers (GSEDs) submitted bids;
 
b)      The government thru the Bureau of Internal Revenue changed the rules on October 7, 2011 – 11 days before the 10-year bonds matured – when it reversed three BIR rulings in 2001 which declared that the PEACe Bonds were not subject to the 20% final withholding tax;
 
c)       It was not only the PEACe bonds that were not subject to the 20% withholding tax.  For example, the National Food Authority (NFA) had also issued treasury notes which were exempted from the 20% withholding tax.
 
In sum, we reiterate that the PEACe Bonds was non-traditional in the sense that it was an innovative measure to raise funds for poverty reduction and development projects of civil society organizations, the process was transparent and legal and the bonds were beneficial for both the government and the Filipino people.

– CODE-NGO –

 
For more information, contact
CODE-NGO Secretariat
Tel. 920 25-95
Email caucus@code-ngo.org