NTRC backs Package 4 of tax reform
Mary Grace Padin (The Philippine Star) - September 15, 2018 - 12:00am

MANILA, Philippines — A state think tank has expressed support for the government’s proposed reforms to simplify taxation on debt instruments and equities.

According to the latest journal published by the National Tax Research Center (NTRC), there is a need to harmonize the country’s taxation system for financial instruments to further boost the growth of the capital market, and generate funds for the administration’s infrastructure program.

“The current policy of the Philippine government is to develop the capital market by providing an efficient regulatory framework, and creating a favorable market environment among its participants,” the NTRC said.

“In terms of taxation, there is a need to harmonize taxes on interest, dividends, capital gains and transactions to maw the taxation of capital income simpler, fairer, and more efficient,” it added.

The think tank, in particular, expressed support for the proposed reforms under the fourth package of the Comprehensive Tax Reform Program (CTRP), citing the benefits of each of its provision.

Under Package 4, the Department of Finance (DOF) is proposing for the imposition of a 0.1 percent transaction tax (TT) on listed debt instruments. It also seeks to gradually reduce the stock transaction tax (STT) of 0.6 percent by one percentage point until it reaches 0.1 percent to equate the proposed 0.1 percent TT.

According to NTRC, the proposal to impose TT and align it with the STT is seen to benefit both investors and tax authorities, as it could lower administrative and compliance costs.

“The potential revenue from the proposed (transaction) tax may also be considered as a compensating revenue measure for the proposed abolition of the IPO tax and the gradual reduction of the STT from 0.6 percent to 0.1 percent by 2024, among others,” it added.

Estimates from the NTRC showed a TT of 0.1 percent may generate an additional revenue of P1.78 billion assuming there will be no reduction in trading volume following its imposition.

Package 4 of the CTRP also provides for a unified final withholding tax (FWT) of 15 percent on interest income, dividends, capital gains and debt instruments. It aims to remove income tax exemptions on fixed income securities with more than five years maturity.

It also seeks to remove the documentary stamp tax (DST) on secondary transfer of shares of stocks to align with those listed and traded at the Philippine Stocks Exchange, and to reduce DST on original shares of stock to 0.75 percent from the current rate of one percent to align it with DST on debt instruments.

  • Latest
  • Trending
Are you sure you want to log out?

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

or sign in with