RP's central bank warns of capital flight if bank secrecy lifted
RP's central bank warns of capital flight if bank secrecy lifted
MANILA (AFP): The governor of the Philippines Central Bank
warned yesterday of large capital flight and a further weakening
of the peso if Congress pushes through with plans to scrap the
bank secrecy law and tax foreign currency deposits.
Law enforcement officials have proposed Congress pass a law
allowing authorities to pry into the bank accounts of suspected
criminals, such as drug dealers, in order to help in their
prosecution.
A tax on foreign currency deposits is among the provisions of
a proposed comprehensive tax reform law awaiting the approval of
both chambers of congress.
"A lifting of the absolute confidentiality rule ... will have
a destabilizing effect on the banking system and the economy as a
whole," Central Bank governor Gabriel Singson said in a paper
prepared for the senate.
He said the lifting of "such cloak of secrecy would abet
capital flight."
Taxing foreign currency deposits would increase intermediation
costs, hurt exporters who source their dollars from these
deposits and force depositors to transfer funds to countries like
Hong Kong and Singapore where they are tax-free, Singson said.
"Imposing tax on foreign funds amid the currently turbulent
investment environment could discourage, if not altogether, drive
out portfolio investors," he said in the paper released to
reporters.
This would put added pressure on the beleaguered Philippine
currency, the peso, which has fallen sharply since monetary
officials allowed it to trade by a wider band on July 11
following speculative attacks on Asian currencies.
The Philippine peso closed at 28.51 to the U.S. dollar on
Friday, down eight percent from its level before July 11.
Justice Secretary Teofisto Guingona has said that Manila's
drive against the nine-billion-dollar-a-year illicit drug
business in the country was being hampered by the lack of an
anti-racketeering law.
Such a law would allow the government to look into the bank
accounts of suspected drug lords and confiscate their legal
assets acquired through the proceeds of illegal businesses.
Singson said he favored "limited cases" in which the Bureau of
Internal Revenue can look into bank accounts, such as the case of
a tax payer who waives his privilege in writing.