The Freedom from Debt Coalition held a press conference on October 18 in support of government's imposition of taxes on 10-year zero coupon bonds, known as the Poverty Eradication and Alleviation Certificates (PEACe), as current bond holders, mostly banks, filed a petition before the Supreme Court contesting the decision.
The debt watchdog likened the PEACe bonds to the financial scams by huge Wall Street banks, which triggered the 2008 financial crisis that led to the collapse of major world economies, stealing ordinary people's pensions and life savings, putting them out of their homes and schools, and causing them to lose their jobs.
Milo Tanchuling, FDC Secretary-General, said the Wall Street banks want super profit and risk-free and no-tax investments, and expect government to bail them out in case of default, using public money. He said the same is true for the banks that bought the PEACe bonds. They know of the taxes but still bought the bonds due to greed.
The controversy revolved around P10 billion in government securities of PEACeBonds, involving the administration of former President Gloria Macapagal Arroyon, the Caucus of Development NGO Networks (CODE-NGO) and Rizal Commercial Banking Corp. (RCBC).
In 2002, FDC did a study that found that the deal reeked with rent-seeking—rules were relaxed and CODE-NGO walked away with P1.8 billion in windfall profit plus a commission of P140 million for designing what it called an "innovative fund-generating mechanism."
The Bureau of Internal Revenue( BIR) has ruled that the bonds are subject to a 20-percent final witholding tax. But several banks that hold the bonds have obtained from the Supreme Court a temporary restraining order on the BIR ruling.
According to FDC, the deal contributed to the further indebtedness of the people. On Oct. 16, the government was scheduled to pay P35 billion in interest for the matured P10-billion bonds, making Filipinos P35 billion poorer and deeper in debt.
To address this issue, FDC called on President Noynoy Aquino to suspend the principal and interest payments of the PEACe bonds, pending the result of an impartial and independent investigation of the irregularity of the transaction and uncertainty surrounding the projects that were funded.
The group also said that there must be a thorough review of policies such as rulings made by the BIR, Bangko Sentral ng Pilipinas, the Monetary Board, Securities and Exchange Commission, Insurance Commission and other agencies with regulatory or quasi-regulatory powers to avoid irregular bond transactions and sweetheart deals.