The stock market may finally get a much-needed boost in its competitiveness amid the global financial crisis, once a measure abolishing documentary stamp taxes (DST) on secondary stock trades is signed into law.
Sen. Panfilo M. Lacson thus urged President Arroyo to sign soonest the measure, which he said promises to benefit local and foreign investors while improving the country's investment rating.
"The costs of investing in the local stock exchange rank among the highest compared with other markets. The high friction costs for securities trading in the Philippines contribute to the local stock market becoming less liquid and investors are discouraged from placing their money in the stock market," said Lacson, whose Senate committee on ways and means secured the approval of the measure in the Senate last Monday.
The House of Representatives passed its version of the measure last April.
Lacson earlier noted the DST had been a double tax of sorts on players in the stock market. He said the DOF computation showed government stands to lose some P1.3 billion while the PSE computation showed a loss of P1.09 billion if the documentary stamp tax is removed.
"The tax was very cumbersome to compute. Even the Finance Department and Philippine Stock Exchange cannot agree on the amount in terms of foregone revenue. Second, it made the stocks exchange uncompetitive because it was like a second tax on top of the stock transaction tax," he said.
Also, he noted Philippine Stock Exchange executives had noted the economy stands to lose much more if investors were turned off because of the taxation.
Lacson noted that when stock trades were exempted from DST from 2004 to 2009, stock transaction taxes collected by government increased 500 percent due to enhanced trading activity in the stock market. However, the five-year exemption to the DST expired last March 20.
Unless the new measure is signed into law, transactions would be burdened with a 75-centavo tax for every P200 par value worth of shares traded through the secondary market.
The Philippine Stock Exchange imposes one of the highest taxes in the stock market because of the stock transaction tax, which is half of one percent imposed on sellers regardless of whether there is a gain or loss in the transaction.