SEC optimistic to compete regionally, despite 20% STT
DESPITE the approval of the 20-percent hike in STT, or stock transaction tax, the Securities and Exchange Commission (SEC) remains optimistic it can compete against its regional peers. The increase will “affect” local equities, all right, it admitted, but said it believes foreign investors are unlikely unnerved given the country’s good economic forecasts.
“It will really affect the market ability of our corporations, their because there will be a little inlevel of good corporate govercrease in transaction cost,” Terenance, their commitment to sita Herbosa, chairperson of SEC, environmental protection. If that told “Now, if is their way of thinking how the you, however, couple that with investment should go, so I think good regulations from our end, foreign investors, in fact, are then we maintain the integrity of more willing to invest, despite the market. You know, investors, the increase in STT.” I think, especially the instituShe also said the SEC weltional investors, won’t mind the comes the amendments in the tax increase as long as the market is reform system “because, overall, fair and transparent.” it’s really aimed at the accelera
tion of economic development of the government’s compre hensive tax reform program, this will generate more activity dubbed Train, or Tax Reform for in the market, then that will also Acceleration and Inclusion, the be good for us as regulators.” STT aims to raise transaction tax She stressed, “Even the increase to 0.6 percent from the existing in STT, as I said, if that would 0.5 percent, or by 10 basis points answer for the agencies like SEC, (bps) higher to 60 bps from the current 50 bps. resources to regulate the markets
“If we talk about foreign infor the good of everyone, then vestors, they have other considthat’s money or taxes generated erations when they come and for a good purpose.” invest, especially institutional The Philippine Stock Exchange, investors,” Herbosa said. “Their however, bucked the plan, saying main preoccupation, I’d like it would make the local market to think, would be the sustain- “uncompetitive” against regional peers. Ramon Monzon, president of PSE, told a news conference earlier the existing 50 bps STT was already the highest in the region. “What we have to understand is the Philippine Stock Exchange does not operate in the local market alone,” he explained. “We really compete with the other exchanges such as those in Thailand, Malaysia, Indonesia, and Vietnam. We compete for the money of the foreign investors.”
Malaysia’s bourse charges only 30 bps in stock transactions in the form of stamp duty, while the exchanges of Hong Kong, Vietnam, and Indonesia only slap a 10-bps tax. Singapore does not impose any STT. “When you’re increasing the transaction tax, you’re increasing the transaction cost,” Monzon explained. “As it is right now… the transaction tax is already the highest in the region.” He said policymakers and legislators should be conscious of what global and regional peers do as foreign investors would always invest in countries where transaction cost is less. “If you are to add the transaction cost, we become very uncompetitive with the other stock exchanges,” he added.
More investors
As a way of enticing more investors, the SEC has moved to double the MPO, or minimum companies from the existing 10 percent. This means that public firms should issue at least 20 percent of outstanding shares that will be freely traded in the local market. It first imposed new IPOs, or initial public offerings. “We already came out new IPOs beginning the date of publication should already within a 12-month period that measures to bring it up again to a minimum of 20 percent,” Herbosa said.
The objective here, she explained, is for the investors, especially the retail ones, to have a wide variety of investments be then it has bonds—divided into government securities and corpo have 270 listed companies, more or less, and if some are dormant and if investors are really picky… they would like, naturally, to be less speculative and trade in stable, sustainable companies she said. “So, if you’re limited only to a number of companies… it would be best that these people who are interested in investing would have more shares out there for retail investors.”
No circular has yet been imposed against existing firms, as studies showed about 66 existing ones are to be affected by the dou-
SEC Chairperson Teresita Herbosa bling of MPO. “But we will have to tackle that sooner or later because - ity of the market [just] because of a few companies that are not that popular and whose shares are not well-traded,” Herbosa said. “We also want them to come up with measures on their own on how to stay listed, despite their very low MPO and, at the same time, we are also thinking of how to deal with the inevitability that we may have to delist some if they cannot increase...”
The dormant ones have reportedly objected on fears that nobody might be interested in buying their shares. But if noncompliance extends beyond 12 months, the SEC will be inclined to remove them forecefully from The SEC is targeting to issue the by mid-2018. “We’re not ignoring market conditions,” Herbosa said. “Maybe we will give it until the middle of next year, although I can honestly say that I’ve been reading some forecasts and they have a good prediction also for the market, so maybe before the mid-year next year.”