House Ways And Means Committee chair Joey Salceda (File photo)
MANILA – A measure seeking to boost the capital markets and the investment competitiveness of the Philippines by reducing taxes for stock transactions has been filed at the House of Representatives.
House Ways And Means Committee chair Joey Salceda filed on Aug. 23 House Bill 8958, or the proposed Capital Markets Efficiency Promotion Act, upon the instruction of President Ferdinand R. Marcos Jr. to enact measures that will boost the capital markets.
A copy of the bill was released to the media on Thursday.
The measure seeks to amend the Tax Code by reducing taxes on stock transactions from 0.6 percent to just 0.1 percent of stock value and the tax on dividends of foreign non-residents from 25 percent to 10 percent.
The proposal also imposes a debt transaction rate of 0.1 percent, in parity with the reduced rate for stock transactions.
“I am pushing for the bill at the President’s instruction. The bill is part of an entire package of both legislative and administrative reforms discussed during a meeting between the Office of the Presidential Adviser for Investment and Economic Affairs and relevant stakeholders, including the Department of Finance, the Securities and Exchange Commission, the Bureau of Internal Revenue, and the Philippine Stock Exchange on their recommendations for improving the overall liquidity of the Philippine Stock Market,” he said.
In the bill's explanatory note, Salceda said the Philippines currently imposes the highest stock transaction levies among all major economies in the Association of Southeast Asian Nations (ASEAN).
“The Philippine Stock Exchange has the fewest listed companies of all ASEAN-6 economies, with just 275 listed companies, with the second lowest already being Singapore, with some 640 listed companies. Since the stock transaction tax was increased from 0.5 percent to 0.6 percent of transaction value, in 2019, the PSEi has declined by 29.83 percent," he said.
Salceda said this has adverse effects on the strength of the country’s pension and health insurance systems because the Social Security System (SSS) and the Philippine Health Insurance Corp. (PhilHealth) charters have strict investment policies that limit their equities exposure almost exclusively to Philippine index stocks.
"If stocks don’t move in value, these funds also stagnate," he said.
Salceda pointed out that aside from the stock transaction tax, the high rate of tax on dividends received by foreign non-resident individuals also discourages foreign investors from buying Philippine stocks, which, in turn, prevents price discovery.
"As a result, Philippine stocks stagnate in value. In fact, monthly transaction volume continues to be lower than 2012 levels in peso terms. In dollar terms, it matches 2007 levels," he said.
He said the proposed reform would result in a revenue loss of PHP9.825 billion but could increase pension assets in the SSS and Government Service Insurance System (GSIS) alone by at least PHP72.9 billion.
Salceda said the House tax panel would discuss the measure “once the budget is approved on the floor, at the latest.” (PNA)
