The government plans to double the tax rate on stock market transactions to 1 percent of the gross selling price in a bid to offset possible revenue losses brought about by other tax measures, Finance Secretary Carlos Dominguez said.
Shares listed in and sold through the PSE are currently subject to a stock transaction tax equivalent to 0.5 percent of the gross selling price.
Dominguez said in a recent forum the Finance Department was currently studying proposals to increase stock sales tax to 1 percent.
“We are…thinking of increasing the tax on stock market transactions from one half percent to one percent. This used to be incidentally 2 percent. So we’ll just bring it to 1 percent for stock market transactions,” Dominguez said.
Securities and Exchange Commission chairperson Teresita Herbosa earlier said while the corporate regulator was open to removing the initial public offering tax, she was in favor of increasing the stock market transaction tax.
“Personally I don’t have any objection to that [removal of IPO tax] because I was told that we’re the only country with IPO tax. But we have to increase stock transaction tax. So maybe if we increase the minimum public ownership, we will also bat for maybe a little higher stock transaction tax,” Herbosa said.
The Finance Department plans to include the higher stock market transaction tax in the fifth package of the updated tax reform program to be submitted to Congress.
The fifth package will also include the reduction of tax on interest income earned on peso deposit and investment from 20 percent to 10 percent and harmonization of all capital income taxes to correct the disparity between rich and poor depositors.
Dominguez said the current rates of interest income taxes were in favor of the rich and discriminated against low-income depositors who had to cope with high tax rates.
He said the agency was studying how to correct the disparity and harmonize current rates for dollar deposits.
We propose to harmonize all capital income taxes regardless of currency, maturity and type towards 10 percent. This way, the poor pay less on the interest income and the rich pay more,” Dominguez said.
“Specifically, we propose to reduce the tax on interest income from peso deposits to 10 percent. Meanwhile, we propose to harmonize all capital income tax rates to 10 percent,” he said.
Dominguez said despite the projected P1-billion revenue loss from reducing the capital income tax from the current 20 percent to 10 percent, this would be offset “with the positive impact of simplicity, equity and efficiency.”