The Philippine Star

NTRC backs Package 4 of tax reform

- Mary Grace Padin

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.

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