The implementation of the reduced stock transaction tax next month could theoretically result in an 83 percent surge in value turnover in the Philippine Stock Exchange, although even a fraction of this growth will already be a big boost to the local bourse.

Abacus Securities Corporation noted that when this tax was increased by 20 percent from 0.5 percent to 0.6 percent, starting Jan. 1, 2018, the market's average daily turnover declined by about 11 percent that year.

“With the sharper magnitude in this year's reduction, in theory and assuming the same level of impact but in the opposite direction, value turnover could increase by up to 83 percent,” it added.

However, Abacus pointed out that, “In reality, the positive impact on value turnover will probably be much smaller.

“However, given that this has not really yet recovered the drop since the start of the Russia-Ukraine war and the rise of crypto trading, even a fraction of the theoretical improvement would already be a huge improvement over value turnover levels of recent years.”

The reduced stock transaction tax (from 0.6 percent currently to 0.1 percent) is set to take effect at the start of next month, July 1, 2025, after the Capital Markets Efficiency Promotion Act was signed into law last May 29.

PSE President and CEO Ramon S. Monzon said the tax is based on the gross selling price or gross value in money of the shares of stock sold, exchanged, or otherwise disposed.

“Section 29 of CMEPA states that the law shall take effect on July 1, 2025, following its complete publication in the Official Gazette or in at least one (1) newspaper of general circulation.

“On the premise that publication of CMEPA will be completed before July 1, 2025, the STT of one-tenths of one percent (1/10 of 1 percent) shall apply to transactions through the Exchange made on July 1, 2025 onwards,” he said.

The bourse said earlier that the reduction is expected to boost trading activity and liquidity in the stock market and PSE's competitiveness against other foreign markets.

Prior to the enactment of CMEPA, PSE had one of the highest friction costs in the ASEAN region.

CMEPA also expands the application of STT to other securities listed and traded through a local stock exchange which lends certainty to the tax regime applicable to the secondary transfer through the stock exchange of asset classes other than equities and facilitate the launch of more products in the local stock market.