Tax is the price paid by a citizen for the services rendered to and for him by the state. This theory is based on a presumed contract or agreement between the citizen and the state. In case you had bought and sold a stock of a public company that is listed in the Philippine Stock Exchange (PSE) then you would have observed that the difference in the total transaction cost between buying and selling is the additional stock transaction tax for selling. Although the stock transaction tax could be miniscule for most investors who use a buy-and-hold investment strategy, it is a burden for most speculators who follow a buy-and-sell trading strategy. On 26 February 2018, the Bureau of Internal Revenue had issued the rules and regulations implementing the increase in the stock transaction tax from 0.5% to 0.6% pursuant to the provisions of the Tax Reform for Acceleration and Inclusion Act. While the increase in the stock transaction tax is expected to raise P1.7 billion in additional annual revenues for the government, the PSE had raised apprehension that the higher stock transaction tax would make the local capital market less competitive as compared to its regional counterparts. Hence it is reasonable to lower the stock transaction tax to a bare minimum to decrease trading charges, increase market liquidity, enhance stock tradability, encourage foreign capital, maximize potential profit and expand market participation among investors and speculators. It is worth mentioning that the 0.6% stock transaction tax of the Philippines is the highest among the Association of Southeast Asian Nations (ASEAN) member countries. Whereas Vietnam and Indonesia impose a 0.1% stock transaction tax, the other ASEAN member countries tax-exempt the sale of stocks. We are writing this blog post to express our earnest support to the House Bill 8958 or Capital Markets Efficiency Promotion Act that proposes to lower the stock transaction tax from 0.6% to 0.1% and the dividend tax of non-resident foreigners from 25% to 10%. The lower stock transaction tax and dividend tax of non-resident foreigners would promote a favorable business environment for investments, support capital raising for companies and simplify the tax system as the distinction on the tax on trading of domestic stocks whether in the local or foreign stock exchanges will be removed. We encourage the members of the legislative branch of government to support and vote in favor of the Capital Markets Efficiency Promotion Act.
