The Philippine equities market hopes to see a surge in trading activity after the anticipated enactment of the Capital Market Efficiency Promotion Act (CMEPA), which includes slashing the stock transaction tax (STT) by 83 percent.
During the Philippine Stock Exchange’s (PSE) InvestPH investor conference, Special Assistant to the President for Investment and Economic Affairs Secretary Frederick Go said this should be the result of the forthcoming law’s provision reducing the STT to 0.1 percent from 0.6 percent.
“The most important part of the bill that relates to the PSE and to the capital markets is it reduces [STT] from 60 basis points to 10 basis points.
“So imagine that it brings down the friction cost from 0.6 percent to 0.1 percent. The premise of reducing the tax is that the volume will go up,” said Go.
He noted that, “It’s very clear to me that the biggest problem in our markets today is liquidity. So we need to boost liquidity in the market, and I cannot think of a better way that government can act than to reduce the friction cost. So we appeal to all the participants, all the stakeholders of the capital markets to try to make this a reality.”
Along with other provisions under the bill, the proposed CMEPA aims to simplify taxation of passive income in the Philippines.
Upon signing of the law, CMEPA will standardize the final withholding tax (FWT) to 20 percent.
It will also reduce the documentary stamp tax (DST) on original issuance of shares to 0.0075 percent from the current 0.01 percent.
CMEPA also grants income tax exemption for gains from redemption of unit investment trust funds (UITFs) and mutual funds, as well as removes DST on the original issuance, redemption, or disposition of shares in mutual funds.