We are making this public statement in relation to the tax issue
surrounding the 10-year Zero-Coupon Treasury Bond also referred to as
the Poverty Eradication and Alleviation Certificates or the so-called PEACe

On October 18, 2001, the National Government issued the PEACe Bonds
worth Ph35 billion pesos. Backed by three rulings issued by the Bureau of
Internal Revenue (BIR), the issuance carried a main feature that it is not
subject to a 20-percent Final Withholding Tax.

Investors bought the bonds relying in good faith on the contracted
undertaking of the government that these were not subject to the tax, but
days before the bonds matured on October 18, 2011, the BIR issued a
ruling deducting a Final Withholding Tax retroactive to the date of the

This ruling prompted a group of investors to file with the Supreme Court a
petition to stop the imposition of a Final Withholding Tax on the PEACe

We, members of the business community, would like to express our
support to the group of investors in upholding the principles that serve as
the foundation for the financial services industry, serving big and small

First, sanctity of contracts – We believe that contractual
commitments arising from government securities should at all times be
held sacrosanct and inviolable by the government.
Second, investor protection – Investors should be protected from
changes in regulation, including those arising from retroactive application
of changes in tax rulings, to help gain and maintain investor confidence in
our capital markets.

Third, stability and predictability in our capital markets – We
must safeguard the presumption of regularity and consistency in the
application of rules, especially for instruments issued by the government.
In the interest of fairness and protection of investors, we appeal to the
government to honor the original terms of securities they issue to the


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