DATA Privacy CASE PSE VS.
SOF
juris doctor (Cor Jesu College)
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DATA PRIVACY CASE
PHILIPPINE STOCK EXCHANGE VS. SECRETARY OF FINANCE
G.R. No. 213860, 05 July 2022
FACTS:
On December 17, 2013, the Department of Finance (DOF), upon recommendation
of the Commissioner of Internal Revenue (CIR), issued RR 1-2014, which
amended the provisions of RR 2-1998, as further amended by RR 10-2008,
otherwise known as the Consolidated Withholding Tax Regulations.
The rule under RR 1-2014 is that all withholding agents are required to submit
only a digital alphalist. By the express provision of RR 1- 2014, the submission of
alphalist where the income payments and taxes withheld are lumped into one
single amount is not allowed.
The CIR requires submission of the tax identification number (TIN) and the
complete name of the payees, together with the corresponding amount of income
and withholding tax.
Failure to comply with these issuances will result to imposition of administrative
and penal sanctions. Claiming to be adversely affected, petitioners filed the instant
Petition for Certiorari and Prohibition directly with this Court to question the
issuances
ISSUES AND RULING:
1. WON THE REGULATIONS VIOLATES THE PETITIONERS' RIGHT TO
PRIVACY.
YES. The Court finds that that the questioned regulations violate petitioners' right
to privacy. Regulations that are alleged to be violative of the right to privacy must
be subject to strict scrutiny.
Under the strict scrutiny test, the State must show that the regulation not only
serves a compelling interest, but is also narrowly drawn in order to prevent abuses.
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The questioned regulations serve a compelling state interest: the effective and
proper collection of taxes.
However, the Court finds that the second requirement was not met. The questioned
regulations were not narrowly drawn to prevent abuses.
There may be abuses as a result of the enforcement of the questioned regulations:
there is no assurance that the information gathered and submitted to the listed
companies pursuant to the questioned regulations will be protected, and not be
used for any other purposes outside the stated purpose.
The Court sees that the enforcement of the questioned regulations puts the right to
privacy of the investors in peril. For this, the questioned regulations must be struck
down.
The Data Privacy Act is applicable to the questioned regulations. Section 4 of the
Data Privacy Act exempts from its coverage information necessary to carry out
public functions.
The Court holds that the collection of information pursuant to the questioned
regulations is not necessary for the BIR to carry out its functions. To reiterate,
there was no showing that there was a problem or inefficacy with the system prior
to the issuance of the questioned regulations.
Respondents failed to take into account Section 13 of the Data Privacy Act on the
processing of sensitive personal information.
The information, particularly the TINs of the investors, sought to be collected and
provided to the listed companies and eventually the BIR, are without a doubt
sensitive personal information.
In sum, the questioned regulations did not comply with the requirements provided
by the Data Privacy Act. The Data Privacy Act is one of the State's measures to
enforce the right to privacy. Any noncompliance with the substantive provisions of
this law (i.e., those pertaining to processing of information) may well be treated as
a violation of the right to privacy.
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2. WON THE QUESTIONED REGULATIONS ARE CONTRARY TO THE
STATE POLICIES UNDER THE SRC, THE TAX CODE, AND THE DATA
PRIVACY ACT.
YES.
Prior to the enactment of RR 1-2014 and the questioned regulations, whenever
there is a dividend declaration on the stocks listed with the PSE, the listed
company, as withholding agent, reports this taxable event to the BIR and may
lump the payees into one account (such as "PCD nominee," "Various Payees," or
"Others.")
There is no disclosure of the personal information of the investors. The broker then
files the required tax return and attachments, as well as remit the tax due.
Subsequently, the PCD nominee forwards the net dividend payments to the
brokers, who then distribute them accordingly to their investor clients.
In RR 1-2014, the withholding agent now cannot list down PCD Nominees as
payees and must disclose all its principals including their personal information in
the alphalist whenever there is a dividend declaration.
Due to the submission of the alphalist now containing information on the
stockholders, the BIR will be able to track all the identities and transactions of the
stockholders.
Even without the disclosure of the personal information, the BIR is able to collect
withholding taxes due from dividend income. Further, the personal information
sought by the BIR through RR 1-2014 are already available publicly in the
reportorial documents that corporations, especially listed companies, submit to
SEC.
RR 1-2014 states that it is issued for "purposes of ensuring that information on all
income payments paid by employers/payors, whether or not subject to the
withholding tax x x x, are monitored by and captured in the taxpayer database of
the Bureau of Internal Revenue (BIR), with the end in view of establishing
simulation model, formulating analytical framework for policy analysis, and
institutionalizing appropriate enforcement activities."
For the Court, and as emphasized by the Chief Justice, these objectives are vague
and highly subjective.
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