The PEACe Bonds debate

These pages contain Fil-Global Fellows' files on one of the most controversial issues that surrounded Philippine NGOs and civil society organisations after Macapagal-Arroyo's assumption of the powers of the Philippine presidency in early 2001 -- the PEACe Bonds.

A coalition of Philippine NGOs that supported Macapagal-Arroyo's bid for power raised money for an endowment fund worth over PhP1 billion through the flotation of government bonds. Controversial issues had been raised on this deal -- moral, ethical, political, economic -- the most trenchant of critiques came from the ranks of Philippine civil society itself.

A number of position papers on the PEACe Bonds were circulated in the Philippine NGO community through e-mail and in printed form. Since most of these materials are no longer available online, we have uploaded here those that we have managed to file away. Where material is available elsewhere in the Web we have provided the appropriate links.

We hope that these materials on the PEACe Bonds debate provide a useful resource to researchers, students, and fellow Filipinos wanting to deepen their understanding of Philippine civil society and NGOs, including its politics and anti-politics.

P35 billion poorer
PEACe Bonds: Unresolved, Ten Years On
Freedom from Debt Coalition8 October 2011
Two weeks from now, the Filipino people will be PhP35 billion poorer and deeper in debt from a multi-billion financial controversy brought forth by the equally controversial Arroyo government.... At a time when the public is reeling from the negative impact of the unmitigated increase in the prices of goods and services, and the Aquino government's unwarranted under-spending combined with the catastrophes brought about by the recent super-typhoons, to carve out PhP35 billion from the people's coffers... is unacceptable, especially if the public will be paying for something whose regularity comes under serious question. read on

A perfect scamEditorial, The Daily Tribune10 October 2011
The so-called Poverty Education and Alleviation Certificate (PEACe) Bonds issued in 2001 was among the biggest racket sprung under the previous administration, all costing the Filipino taxpayers P35 billion which government gave away to a private group called Caucus of Development NGO Networks (Code-NGO) a P1.4 billion windfall, tax free. read on
House Committee inquiry on the PEACe Bonds smacks of 'lutong makaw'Freedom from Debt Coalition8 October 2011
The House Committee Report on the PEACe Bonds is expected to be released any day next week, days before 16 October 2011 -- the maturity date of this bond.... Unfortunately, despite the seriousness of the issues raised against the PEACe bonds, the huge debt burden the bonds imposed on our people and the wide public attention and participation it generated, the House Committee inquiry conducted was devoid of transparency and all-sidedness and seriously wanting in thoroughness. read on

Peace Bonds report pulled, investigation reopenedManila Standard13 October 2011
THE House panel on Tuesday withdrew the committee report favoring the controversial P10-billion Poverty Eradication and Alleviation Certificates, for which taxpayers will have pay P35 billion starting Oct. 16, and ordered a reopening of the investigation of the bonds.... 'for the sake of due process, the panel will reopen the inquiry so we can listen to what the FDC has to say against the deal and CODE-NGO, ' [Congressman Rufus Rodriquez] told the Manila Standard. read on

A last-minute P5.4 billion twist...

BIR finds Code-NGO liable for P4.86B tax on PEACe BondsLuz Rimban and Yvonne Chua, VERA Files17 October 2011
THE Bureau of Internal Revenue has found the Caucus of Development NGO Networks (Code-NGO) liable to pay close to P5 billion in taxes for its purchase of the so-called PEACe Bonds 10 years ago.... But it remained unclear if and how government would collect from Code-NGO because the bonds are no longer in its possession: On the same day it bought the bonds from the Bureau of Treasury (BTr), Code-NGO sold them for P1.83 billion. The bonds, in turn, have been resold, mostly to banks and insurance companies.... Several bond holders interviewed by VERA Files complained that Code-NGO will apparently go scot-free despite having enticed investors to purchase the bonds by dangling the tax-exempt status that was eventually nullified. read on

A belated tax on zerosDean de la Paz, Business Mirror13 October 2011

LAST Friday, exactly 12 days before the government honors a commitment established 10 years ago when it issued zero coupon (Zeros) treasury bonds in its effort to reduce borrowing rates, in a curious departure from established protocols, the Department of Finance (DOF) summoned bank treasury officers and other ranking executives. Many of those called were caught unawares. read on

Treasury bars trading of PEACe BondsPhilippine Daily Inquirer12 October 2011
The Bureau of the Treasury has disallowed the trading of the so-named PEACe bonds after the Bureau of Internal Revenue affirmed its ruling that the securities were subject to the 20% withholding tax.... Asked why a change of hands has been prohibited, [National Treasurer Roberto Tan] told the Inquirer that this was done “so that uninformed investors who might be offered to buy can be protected.” read on

The deeper implications of taxing the PEACe BondsFilomena Sta. Ana III, Action for Economic Reforms10 October 2011
A key component of the PEACe Bonds--one of the sweeteners--was the ruling of then BIR Commissioner Rene Banez to exempt the certificates from the 20 percent withholding tax.... Precisely, it is the Banez ruling that the current BIR has overturned. read on

BIR slaps 20% tax on PEACe Bonds
The Daily Tribune9 October 2011
The Bureau of Internal Revenue (BIR) said it would impose a 20 percent final withholding tax on the controversial P35 billion PEACe Bonds, which the government will be required to pay on Oct. 18 when its 10-year maturity falls due, the Department of Finance (DoF) said in a statement. read on

PEACe Bonds subject to 20% final withholding tax
Department of Finance7 October 2011
The Bureau of Internal Revenue (BIR) confirmed today that the 20% final withholding tax is applicable to the so-called PEACe Bonds. In its Ruling, the BIR stated that the Bureau of the Treasury should withhold the applicable tax from the P35 Billion face value of the bonds which is set to be paid out on October 18, 2011. The tax due is estimated at almost P5 Billion. read on
For a copy of BIR Ruling No. 370-2011 on the PEACe Bonds dated 7 October 2011, click here to download (pdf file, 4.8mb)

Banks ask SC to stop 20% tax on PEACe Bonds
Benjamin B. Pulta, The Daily Tribune18 October 2011
Some of the country's biggest banks sought the Supreme Court's (SC) intervention in issuing an order to restrain the Bureau of Internal Revenue (BIR) from imposing a 20 percent final withholding tax on the Poverty Eradication and Alleviation Certificate Bonds or the so-called PEACe bonds 10 years late and when the government debt papers are scheduled for payout today, a move which could mean potential losses of income amounting to P5 billion for bond investors. read on

SC issues TRO on PEACe Bonds tax
abs-cbnNEWS.com18 October 2011
The Supreme Court has issued a temporary restraining order on the Bureau of Internal Revenue (BIR) ruling imposing a 20% final withholding tax on the government's Poverty Eradication and Alleviation Certificates (PEACe) Bonds. Supreme Court spokesman Midas Marquez said the banks have been ordered to put in escrow the withholding tax, equivalent to P5 billion, until the high court settles the case. Marquez said this was to protect the government in case the court rules that the bonds are taxable. read on

Tax on PEACe Bonds: Supreme Court TRO fails to restrain
Roel Landingin, Philippine Center for Investigative Journalism
18 October 2011
The Supreme Court order had not reached the Bureau of Treasury or Bureau of Internal Revenue by the close of office hours at 5 pm Tuesday. “We didn’t receive any order from the Supreme Court,” said BIR Commissioner Kim Jacinto-Henares at around 6:30 pm. She repeated the same statement hours later when she appeared in a television talk show on ABS-CBN News Channel. Henares said the Bureau of Treasury more likely withheld the 20 per cent final tax on interest gains on the PEACe bonds, in the absence of an official copy of the TRO. “The Bureau of Treasury has no choice but (to) withhold it,” she said. read on

Vanishing trade in PEACe Bonds: The truth, the banks, and the BIR
Roel Landingin, Philippine Center for Investigative Journalism
25 October 2011
Kim Henares, chief of the Bureau of Internal Revenue (BIR), triggered some curiosity about the trading of the bonds when she said recently in a television talk show on the ABS-CBN News Channel that the sharp drop in buying and selling activity in the bonds in 2004 (see graph) was a sign the banks are not being entirely truthful about some of their claims.... “I don’t believe the banks don’t know about it because if you look at the history of the trading of that bond, right after we issued the 2004 ruling, the trading became markedly decreased,” she said during the television talk show last week. “I hate to say that they are not saying the truth but the circumstances seem to point (to the fact) that the banks know that it’s no longer as attractive.” read on

BIR asks SC to junk banks' petition on PEACe bonds
Ina Reformina, abscbn-news.com
2 November 2011

The Bureau of Internal Revenue (BIR), through the Office of the Solicitor General (OSG), asked the Supreme Court (SC) on Wednesday to junk a petition filed by 8 banks against a BIR ruling that imposes a 20% final withholding tax (FWT) on the government's Poverty Eradication and Alleviation Certificates (PEACe) bonds, which matured last Oct. 18. In its 137-page comment on the petition filed by by Banco de Oro, Bank of Commerce, China Banking Corporation, Metropolitan Bank and Trust Co., Philippine Bank of Communications, Philippine National Bank, Philippine Veterans Bank, and Planters Development Bank, the BIR maintained that it did not commit grave abuse of discretion in issuing BIR Ruling No. 370-2011 dated Oct. 7, 2011 that seeks to impose the FWT. read on

Civil society as crony?

On the matter of the PEACe Bonds
Freedom from Debt Coalition

We belong to civil society in whose name the Caucus of Development NGO Networks (CODE-NGO) made P1.4 billion through the flotation by the Arroyo government of the so-called PEACe Bonds.... The PEACe Bonds controversy goes beyond CODE-NGO. It exposes the weaknesses of Philippine socioeconomic and political life. read on

A case of impermissible rent-seeking
Action for Economic Reforms and Friends

Much heat has been generated by the national government's issuance of the PEACE Bonds that resulted in the transfer of PhP1.4 billion to the Caucus of Development NGO Networks (CODE-NGO). For one, an esteemed colleague in the human development advocacy, Solita Collas-Monsod, has written that the critics' accusation of cupidity or stupidity against " everyone involved [with the PEACE Bonds]...reflects on their ignorance, or envy, or political opportunism." But a good number of critics are not the ignorant, envious and opportunist type. Our opposition to the PEACE Bonds stems from a cold analysis that CODE-NGO was engaged in impermissible rent-seeking to obtain the PhP1.4 billion. read on

Not for poverty eradication
Pagtinabangay Foundation Inc.

Sustainability, though a problem to us, does not give as an excuse to jump into the foray of the CODE-NGO. To access their fund only means blinding ourselves to the issues that surround the P1.4 billion fund, issues on good governance, transparency, influence-peddling and corruption. read on

Smarter than others? The RCBC and CODE-NGO's PEACe Bonds
Jude Esguerra for the Institute for Popular Democracy

CODE-NGO wishes the public to believe that it received P1.4 billion for its PEACe and Equity foundation because of an innovative idea…. Instead of handshakes, CODE-NGO’s revelation of its transaction with government and RCBC [Rizal Commerical Banking Corporation] raised more questions, not to mention eyebrows. download the paper (pdf file)

Robbery in bond--plain and simple
A TODAY editorial, 08 February 2002

No remorse was to be gleaned from President Arroyo's defense of the PEACE bond fiasco that cheated the government of P5 billion in taxes just for starters, and that will then bleed the taxpayers of billions more.... read on

In defence of the bonds

CODE-NGO's PEACe Bonds: Financing civil society's fight against poverty
Danilo A. Songco for CODE-NGO

The idea behind the PEACe Bonds project was to raise P1 billion from the capital market, a potent source of funds. The target amount had to be big in order to make a significant impact on a colossal problem. CODE-NGO would buy bonds from government and sell them in the secondary market. The profit from this sale would be used to establish an independent foundation that would manage a trust fund (only the interest would be spent) to finance NGO/PO projects to fight poverty. download the paper (word doc)

Tax payers were not disadvantaged
Foundation for Economic Freedom

Several arguments have been raised on both sides but we believe that one crucial question has not been adequately addressed in the crossfire. This question, to our mind, holds the key towards developing a dispassionate and rational perspective on the whole issue. read on

Postscript

Don't resign, just return the money
A TODAY editorial, 06 March 2002

We hate to sound uncharitable, but we cannot let pass their maudlin open letter to newspapers without pointing out what they have missed: in fact, they missed the entire point raised in all the hue and cry about the PEACe bonds brouhaha that has caught their organization, the CODE-NGO, in the center of the storm. We have to say this because, unless it is pointed out to them, the people at CODE-NGO and their friends who wonder why people who do charity work should be subjected to endless bashing, will continue to ignore the one important thing they must do to set it right. That is, they simply have to return the money and acknowledge that while the intention was good, the process was wrong. read on

Resignation letter of Songco and Camacho-Reyes
Published in TODAY newspaper, 05 March 2002

The past weeks have been a challenging period for us. We have attempted to clarify issues behind the PEACe bonds in many forums including hearings in both legislative chambers. read on

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