Removal of Stamp Tax on Stock Trading in the Philippines
Posted on July 18th, 2009
Last June 30, 2009; amidst the time when Philippine government is in need to fund a wider deficit on budget this year amounting to 250 billion pesos, a law was signed to attract more investors.
The second woman president of the Philippines, President Gloria Macapagal Arroyo has signed a law that will permanently remove documentary stamp on the sale, exchange of listed share or barter. President Arroyo’s decision to permanently remove the documentary stamp on stock trading was done to stimulate the market by attracting investors on a more economical business expenses.
The implementation of the newly signed law will totally damp a 2004 law which stated a five-year suspension of the imposition of documentary stamp tax on transactions that are related to stock.
Francis Lim, president and chief executive officer of Philippine Stock Exchange (PSE), said in a statement that it is a critical trade-off to attract investments by lowering down the cost of doing business in the country especially in times when risk aversion are heightened.
According to PSE, a documentary stamp tax that is equivalent to seventy five centavos (0.75 pesos) for every 200-peso par or equivalent value of a stock listed at the exchange was levied on the secondary trading of shares. But, this was before the exemption took effect.
The Philippine government, with the implementation of the new law, will about to lose 1.4 billion pesos in revenues each year based on the estimation shown by the Department of Finance.
Extending the exemption on the documentary stamp tax for another five more years was amenable according to the finance officials but making it permanent is not, as it might bring big loses to the budget of the country in the long run.
Though the intension of attracting more investors is good, on the other hand taking this law in effect permanently might affect the government’s program for its people specially if the number of the investors who will invest in the country will not be enough to cover up for the billions that will be lost each year.
