THE House Committee on Ways and Means on Tuesday approved the unnumbered substitute bill to House Bill 8958, also known as the Capital Market Efficiency Promotion Act, which aims to boost stock market volumes to benefit the funds of the Government Service Insurance System, the Social Security System, and Philhealth, as well as corporate pension plans provided to employees.
“The measure will help boost the Philippine stock market, which has stagnated at the expense of pensioners, small investors, and others whose incomes rely on these passive investments,” the panel’s chairman, Albay Rep. Joey Sarte Salceda said.
The approved proposal includes the following features:
1. Outright reduction of the stock transaction tax (STT) from 0.6 percent to 0.1 percent;
2. Expansion of the definition of shares of stock to include options, derivatives, and short-selling, and the removal of the gross receipts tax of 7 percent on net trading gains by banks and financial institutions; and
3. Reduction of the tax on dividends to non-resident aliens from 25 percent to 10 percent.
The expansion of the definition of shares of stocks was made upon the proposal of the Philippine Stock Exchange. (PSE).
During the hearing, Salceda said the PSE also assured the committee that the increase in transaction volumes needed to make the stock transaction tax reduction neutral was “achievable.”
The substitute bill also removed the debt transaction tax originally proposed in HB 8958, at the suggestion of a position by the Bankers Association of the Philippines.
“This proposal will also help potential listings in the market, including the Maharlika Investment Fund and the proposed listing of shares of the Landbank of the Philippines. Once offered to the public, shares of these GFIs will create new resources for national development,” Salceda, the House resident economist, said.
Salceda also pushed the Securities and Exchange Commission (SEC) to undertake measures to protect small retail investors in the stock market.
“I am mandating the BIR, the SEC, and the PSE to resolve the issue of stock dividends not yet issued by the Philippine National Bank. That issue has gone on for a few years now, and if the problem is with the BIR not issuing the certificate authorizing registration, we should be able to solve that among government agencies.”
Salceda likewise asked the SEC and the PSE to relax rules on listing “to disrupt the big boys club” in the PSE and increase options for the average investor.
“We have only 280 listed companies, and our neighbors are now ranging in the 480 to 600 levels. Our rules which focus on earnings completely lock out startups.”