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NEWS UPDATES October 2010

Philippines may tax investors

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Amid the local stock market's bull run, the Bureau of Internal Revenue (BIR) is mulling over reducing the tax perks enjoyed by the stock market given the negligible number of ordinary Filipinos trading shares. Deputy Commissioner Nelson Aspe told The Manila Times that the government is losing about P1 billion from exempting stock market transactions from the documentary stamp tax (DST).

"From the annual volume of stocks being traded, the government gets P5 billion. However, with the exemption from DST, we forgo P1 billion. Thus, we now get P4 billion, instead of P5 billion [a year]," Aspe said.

"The government is more inclined to rationalize fiscal incentives. This one [stock market exemption from DST] and the small amount of levy on it should likewise be looked into," he said.

The BIR official said that the DST exemption was put in place to encourage the public to invest in one of Asia's oldest bourses.

He said the incentive however has to be reviewed given that only less than a percent of Filipinos have invested in the stock market since Congress put in place the tax exemption last year.

Data earlier disclosed by the Philippine Stock Exchange (PSE) showed that individuals earning between P500,000 and P1 million a year comprised 41 percent of retail investors while those earning less than P500,000 a year made up about a third. The remaining 25.3 percent of retail investors earned more than P1 million a year and were considered the most active.

By profession, most retail investors were professionals and were engaged in the services sector at 24.3 percent and 24 percent, respectively. Most local retail investors or 86.5 percent were based in Metro Manila.

Aspe said those who regularly trade stocks are taxed the least since they are not subject to DST, as against those who earn simply from holding on to their shares, which is subject to DST and a 5 percent to 10 percent capital gains tax.

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