Lectures &

News & Views

Law &



Trust Products
& Practice

About the Guru


Email Feedback

Guest Register










A crowning boo-boo of Renato

(Article published in the May 16,2012 issue of Manila Standard Today)   

By the time this column sees the light of day, the dark night of the Impeachment Trial shall have been over.  And while the process we have gone through, particularly its twists and turns, is, in senses more than one, sui generis, some subjects that were highlighted during the hearings remain to be of general interest, if not of concern. These are the subjects that somehow or another affect us personally; among them is the matter of foreign currency bank deposits.

Renato C. Corona, on the witness stand last May 22, asserted that the foreign exchange rate between the Philippine peso and the US dollar at the time, he, during the late 60s, started investing his funds in the latter currency was only 2:1.  Asked to be more precise, he responded by recalling that up to 1969, the exchange rate was still at 2:1 and that it went up to 6:1 when it was allegedly “devalued to floating rate” in January 1970.

It could be that his hypoglycaemia, which was subsequently invoked as the explanation for his unceremonious walk-out at the end of his opening statement, had started to creep on him by the time he reached this portion of his testimony; his history of our foreign currency exchange rate was terribly inaccurate.  Either that, or he was deliberately misleading the senator-judges.


The exchange rate of 2:1, or two Philippine pesos for one US dollar, was actually mandated by Commonwealth Act No. 699.  Under Section 6 of said law, the par value of the Philippine peso was to be represented officially as no “other than one-half of a United States dollar of the weight and fineness in effect on January 1, 1944”.   This rate of exchange was maintained even after the passage in 1948 of the Central Bank Act (R.A. No. 265).


 It remained at this legislated level until 1965.  On November 6 of that year Executive Order No. 195 was issued.  This presidential issuance provided: “Pursuant to the power vested in me by Republic Act No. 265, and in conformity with the provisions of all executive and international agreements subscribed to and ratified by the Republic of the Philippines, and upon proposal of the Monetary Board with the unanimous concurrence of the members of the Monetary Board, I, Diodado Macapagal, President of the Philippines, do hereby modify the par value of the peso from US$0.50 to US$0.2564103 (U.S. dollar of the weight and fineness in effect on July 1, 1944) effective noon on Monday, the eighth day of November, 1965.”  In rounded terms, the mandated rate under Macapagal’s executive order which took effect right smack into the middle of the decade of the 60s  was 4:1,  not 6:1 as Renato Corona asserted.


This rate was attested to by two decisions of the Supreme Court.  On June 23, 1988, the court decided the case of N.V. Reederij “Amsterdam” and Royal Interocean Lines v. Commissioner of Internal Revenue, G.R. L-46029.  The second of two issues in that case was at what rate, for purposes of determining the income tax liability of the taxpayers, the foreign exchange receipts were to be converted.  Was it 2:1 or 3.90:1?


The shipping vessel “Amsterdam” was not doing business in the Philippines; it made only two calls on Philippine ports, one in 1963 and the other in 1964.  As foreign corporation not doing business in the Philippines, it was liable to income tax on a percentage of its gross income earned in the Philippines.  Its income was in U.S. dollars; hence, the initial issue of what rate of exchange to then apply on its gross income in foreign currency for purposes of calculating its income tax liability which was to be paid in Philippine pesos.


The Supreme Court held: “The conversion rate of P2:US$1 which petitioners claim to be applicable to the income of petitioners for income tax purposes is likewise not tenable. The transactions involved in this case were for taxable years 1963 and 1964.  Under Republic Act No. 2609, the monetary board was authorized to fix the conversion rate for foreign exchange.  The free market conversion rate for those years were P3.90: US$1.00.”


The Supreme Court also reiterated its ruling in a previous case: “This conversion rate was definitely settled by this Court in the case of Commissioner of Internal Revenue v. Royal Interocean Lines and Court of Tax Appeals (G.R. No. L-26806, July 30, 1970; 34 SCRA 9).”


What prompted Renato Corona to weave his unhistorical narration in order to justify the extent of his foreign exchange holdings that were not reported in his SALN will most likely remain a mystery for sometime, unless he, at one point decides to make a clean breast of everything. In his private life, he worked in a commercial bank as well as in an accounting firm.  He must have known that his allegations by way of justification were easily verifiable and, if found inaccurate, definitively exposed to be erroneous.


As things stand at the time of this piece is by my editors put to bed, what is obvious is the very strong likelihood of his having to be helped out from the marsh of spring cabbage, known in his local dialect as kankungan.