The Bangko Sentral ng Pilipinas (BSP), which is still battling for tax-exemption, has asked banks to advance tax payments on their reverse repurchase agreements (RRPs) and special deposit accounts (SDAs) to boost its own dividend payments to the National Government.

Some of the tax payments are reimbursements to the BSP, equivalent to 40 percent of the 20 percent tax due.

Since August 2008, the withholding tax was being deducted from banks deferred revenue accounts.

The BSP is proposing to be exempted from paying taxes on the open market operations which includes RRPs and SDAs.

Lawmen, currently hearing amendments to the central bank charter, were amenable to giving the tax exemption. However the Department of Finance (DoF) prefers granting the BSP tax subsidy instead of tax exemptions.

During the hearing of the House committee on ways and means this week, the DoF said the BSP should be granted a tax subsidy since this will cost the government only P3.94 billion while an outright tax exemption will translate to revenue losses of P4.19 billion.

BSP Deputy Governor Diwa C. Guinigundo rejected the DoF proposal, arguing that central banks in other countries are enjoying tax-free privileges.

The DoF countered that in these countries, central banks remit 100 percent of their profits to the main government. The BSP pay the NG only 75 percent of its profits a year. The BSP said the government's foregone revenue is not that big, only P11.8 million as of November last year.

The Bureau of Internal Revenue, in the meantime, said the amount is actually bigger because of a compromise agreement that allowed the BSP to pay only P1.14 billion instead of P3.6 billion of taxes due on its open market operations in 2008.

The BSP and the BIR has resolved the issue of whether or not RRPs are deposit substitutes, which they are, under the country’s revenue law.