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Philippines: 4th tax reform package seen to boost capital market
MANILA, Philippines — The government is seeking to further boost the domestic capital market by harmonizing tax rates on capital income and financial products as proposed under the fourth tax reform package, the Department of Finance (DOF) said Wednesday.
In a presentation to the House Committee on Ways and Means, Finance Undersecretary Karl Kendrick Chua said Package 4 of the Comprehensive Tax Reform Program (CTRP) would help further develop the domestic capital market which could become a major financing tool for both public and private projects.
“Package 4 is really about harmonizing 80 rates in the financial and capital system and by doing so, deepening the financial or capital markets in the country so that we can leverage this to fund the massive infrastructure needs and also the programs of the private sector,” Chua said.
Under the proposed measure, the DOF is pushing for a unified rate of 15 percent for capital income, regardless of the type of issuer, currency, instrument and maturity.
“This will benefit so many poor, middle class and ordinary Filipinos whose main savings or investment are the long-term time deposits or some of the debt instruments,” Chua said.
He said Package 4 also seeks to impose a single rate of five percent for the gross receipts tax of the banking system to allow easier transaction for businesses.
It also aims to reduce transaction taxes, primarily the documentary stamp tax on different financial instruments, such as non-life insurance policies and stocks.
Chua said this provision would help promote insurance products, especially as the country needs more protection against financial loss as a result of calamities and disasters, and ease secondary trading.
Lastly, he said the package also proposes to repeal 32 of the 41 special laws granting special rates and exemptions on capital income and financial taxes.
“In the end, we hope to reduce all the rates from 80 to just 41 so that we can have a system that is simpler, fairer and more efficient,” Chua said.
“Package 4 is designed to be broadly revenue-neutral so the objective is not really to fund the finances of the government, but to first, fix the tax system so that it can deepen the capital market and indirectly, it can create a future revenue stream to fund our priority programs,” he added.
The proposed tax reform on capital and financial markets is part of the five-part CTRP of the Duterte administration.Currently, other packages are pending in Congress, including Package 2 on corporate income tax and fiscal incentives, Package 2 Plus on tobacco, mining and alcohol taxes, and Package 3 on property valuation.
Source: https://www.philstar.com/business/2018/11/15/1868591/4th-tax-reform-package-seen-boost-capital-market#wdtszbeGlUtZaebV.99