(Eagle News)–The Bureau of Internal Revenue has expressed its support for a measure that aims to allow banks to dispose of their bad loans and other non-performing assets through asset management companies.
The BIR formally expressed its support for the Financial Institutions Strategic Transfer (FIST) bill in a letter sent by Commissioner Caesar Dulay to Senator Grace Poe.
The Department of Finance also backs the measure, which President Rodrigo Duterte described during his 5th State-of-the-Nation Address as a key component of the government’s plan to recover from the COVID-19 pandemic-induced economic downturn.
The House of Representatives earlier passed its version of FIST—House Bill No. 6816—before the sine die adjournment of Congress in June.
“Finally, we are one with the DOF, Bureau of the Treasury, Bangko Sentral ng Pilipinas 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 noted that the tax incentives provided under the FIST bill “should not be perpetual but time-bound.”
He also noted the safety measures in place under the FIST bill, such as “the imposition of penalties and administrative sanctions in case any person violates any of its provisions.”
“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.
In the Senate version of FIST under Senate Bill No. 1594, specialized asset-managing firms would acquire “bad loans and stagnant properties” from distressed financial institutions.
Finance Secretary Carlos Dominguez III has said that the proposed asset management companies under FIST were an “improved version” of the special purpose vehicles provided under a 2002 law passed by Congress to curb the economic damage wrought by the 1997 Asian financial crisis that lasted till the early 2000s.
Dominguez said allowing banks to outsource the management of their non-performing assets to asset management companies will enable them to focus on their primary task of lending to sectors in need of credit.
FIST will also encourage the private sector, government financial institutions and government-owned or -controlled corporations to help rehabilitate distressed businesses, he added.
The measure also provides tax incentives to defray the transaction and transfer costs of non-performing assets to asset management companies.
Dominguez said that while 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, “we believe that the economic benefits of strengthening the financial sector through this effort outweigh the fiscal costs of doing so.”
