The Bureau of the Treasury (BTr) signed a Memorandum of Agreement (MOA) with the Bureau of Internal Revenue (BIR) at a ceremony held at the Makati Shangri La last 9 January 2015. The MOA covers the Specials Repo program, a key initiative directed to developing the domestic fixed income market. Introducing the Specials Repo will allow market players the ability to quote two-way prices for Government Securities.
The Specials Repo program is being structured in cooperation with market regulators (Bangko Sentral ng Pilipinas and the Securities and Exchange Commission), partner development agencies (Asian Development Bank) and other key market participants (Bankers Association of the Philippines). This program is under the sponsorship of the Bureau of the Treasury in partnership with the Money Market Association of the Philippines (MART) as proponent from the market side.
The MOA will set out the proper tax treatment for the Specials Repo, as well as provide guidance and basic parameters for its structure, operational mechanics and taxation-regulatory compliance by potential market participants in the program. Under the MOA, the BIR and BTr will cooperate to ensure proper monitoring of Repo transactions, directed to establishing audit and surveillance trails and mechanisms to ensure tax assessments and collections in compliance with tax regulations.
The Specials Repo transactions are being envisioned for the interbank/professional market participants. It will be governed by the Global Master Repurchase Agreement (GMRA), an internationally accepted Repo master agreement developed jointly by the Securities Industry and Financial Markets Association (SIFMA) and the International Capital Market Association (ICMA). The “deliver-out, true sale basis” feature of this instrument is expected to give potential market makers the ability to take positions in GS and provide them greater ability to manage their portfolio. The MOA is a precursor to the eventual Revenue Memorandum Circular that will cover the Specials Repo.