The Philippine Stock Exchange (PSE) hailed the passage of the Capital Markets Efficiency Promotions Act (CMEPA), calling it a major step toward improving trading activity and liquidity in the local stock market.
The PSE said the law, which will reduce the stock transaction tax (STT) to 0.1 percent from 0.6 percent, is a much-awaited reform that will benefit stock market investors. It will boost the local bourse’s competitiveness compared to foreign markets, it said.
Before the law was passed, the PSE had one of the highest friction costs in the ASEAN region.
Republic Act No. 12214 or the CMEPA law is expected to encourage ordinary Filipinos to invest in the Philippine capital markets and promote inclusive growth.
It expands the scope of the STT to cover more types of securities traded through local stock exchanges. This change provides more clarity on tax rules for the secondary trading of different asset classes beyond equities and will help pave the way for new market products.
The law also includes other key provisions to support capital market development. It introduces a broader and clearer definition of securities to simplify tax treatment for different financial instruments, which is expected to support the creation of new products such as derivatives.
Another provision reduces the documentary stamp tax on the original issuance of shares to 0.75 percent of the par value from 1 percent. The PSE said this would benefit companies issuing new shares through initial public offerings or other equity listings.
The law also provides an additional 50-percent tax deduction for private employers who match or exceed their employees’ contributions to the Personal Equity and Retirement Account (PERA). This move is expected to encourage more stock market transactions.
Average daily value traded at the PSE reached P6.7 billion so far, higher than the previous year’s average of P6.1 billion.