Vol. XXII, No. 121 [ BusinessWorld Online ]
Wednesday, January 21, 2009 | MANILA, PHILIPPINES
THE HOUSE of Representatives Ways and Means Committee yesterday approved a proposal to permanently exempt stock transactions from the documentary stamp tax (DST), leaving the stock transaction tax and the 12% value-added tax (VAT) as the only tax impositions on trading at the local bourse.
House Bill 4900, authored by Aurora Rep. Juan Edgardo M. Angara, seeks to permanently exempt from DST — amounting to 75 centavos per every P200 par value — any sale, barter or exchange of shares of stock listed and traded through the stock exchange, beyond this incentive’s scheduled expiration this March. Republic Act No. 9243, enacted in 2004, suspended for just five years the DST on such transactions.
"The Finance department should just have one taxation scheme that will cover both the documentary stamp tax and the stock transaction [tax]...let’s just impose one tax," committee chairman Rep. Exequiel B. Javier of Antique said during the public hearing on the bill yesterday.
The stock transaction tax amounts to one-half of 1% of the value of each transaction.
Other fees and taxes investors in the stock market pay are:
* a brokerage commission, involving a maximum of 1.5% of transaction cost plus VAT;
* transfer fee of P100 plus VAT;
* cancellation fee of P20 plus VAT; and
* Securities Clearing Corp. of the Philippines fee of 0.0001 x value of transaction.
Philippine Stock Exchange President Francis Ed. Lim said in the same hearing that the bourse needs "perpetual" exemption from the DST, noting that the country has one of the highest costs for stock market investors.
"The stock market is declining at rates we haven’t seen since the Asian crisis — it is down by 47%. There is a continued decline in liquidity, capital raising, and average daily value turnover," he told lawmakers.
Last year saw net foreign selling at the bourse amounting to P47.85 billion, a 186.11% drop from the P55.57-billion net foreign buying recorded in 2007.
Mr. Javier agreed, saying: "Let’s just repeal the tax. That will be good...for making the country hospitable to investments and... competitive by providing an attractive climate for investors."
But Finance Undersecretary Gil S. Beltran told lawmakers his department is amenable only to a three-year extension of the DST exemption, with Finance director for fiscal policy Ma. Teresa S. Habitan noting that the exemption has been costing the government some P600 million each year in foregone revenues.
"We still oppose the [DST’s] removal due to revenue considerations," Ms. Habitan said in an interview on the sidelines of the hearing yesterday.
"However...we agreed to its temporary suspension...as we are to consider the present situation of the stock market due to the economic meltdown, we can only agree to a three-year extension of the earlier enacted law [RA 9243]," she stressed. — J. F. S. Valdez