ECQ costs govt P470M in DST
THE exemption from documentary stamp tax (DST) on qualified loans during the enhanced community quarantine (ECQ) period likely resulted in a P470-million foregone revenue for the government.
This is according to the latest “Bayanihan to Heal As One Act.” journal released by the National “Initial estimates on the exemption Tax Research Center ( NTRC), of DST for credit extensions or where it assessed the tax implications restructuring of loan payments due of the exemption from DST within the ECQ period, along with on qualified loans falling within the extension of tax-compliance the ECQ period pursuant to the deadlines, will cost the government Republic Act (RA) 11469 or the P470 million during the period of implementation of RA 11469,” it said.
According to the state think tank, the DST is a tax upon documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale of transfer of an obligation, right or property incident thereto and in respect of the transaction accomplished.
As the RA 11469 provided grace period for the payments of all taxes, loans and rents, among others, during the ECQ period from March 17-April 30, it said several revenue regulations were issued by the Bureau of Internal
Revenue ( BIR), which ordered an exemption from DST on said transactions.
In particular, the BIR Revenue Regulation 8-2020 provides that no additional DST shall be imposed on credit extensions, credit restructuring and micro-lending, including those obtained from pawnshops, and extension thereof, during the ECQ period.
The tax bureau also issued Revenue Memorandum Circular 36-2020 “to clarify the exemption from DST fro qualified loans to ensure that the burden of debt is lessened without compromising the viability of the lending institutions,” the NTRC added.
The same tax treatment shall apply to all extensions of payments and/ or maturity periods of all pre-existing loans, including but not limited to salary, personal, housing and motor vehicle loans, falling due within the ECQ period.
The think tank emphasized that the exemption of qualified loans during the ECQ period from the DST is “justifiable,” but “will result to substantial revenue loss from the DST exemption.”
The projected revenue loss compares to estimated DST revenue of P188 billion this year and the annual average of P43 billion from 2014 to 2018, it added.
“Since the DST is a transaction tax, the slowdown in economic activities and fewer transaction due to Covid- 19 ( coronavirus disease 2019) will have a negative impact on the attainment of the DST revenue target,” the NTRC also emphasized.
That said, the think tank urged the BIR to ensure the effective and efficient collection of DST on other documents/ instruments/ transactions not covered by the exemptions.