Tax cut to boost trading

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Tax collection will benefit from a proposal to reduce stock transaction tax to 0.1 percent of stock value from the current 0.6 percent in terms of encouraging more trading activities, according to Frederick Go, special assistant to the President for Investment and Economic Affairs.

Speaking before members of the Federation Of Filipino Chinese Chambers Of Commerce & Industry Inc. last week, Go said the reduction “doesn’t necessarily mean  tax collections will drop because the volume could go up more than 6x.”

GO

“Because when the high volume traders come in or the retail market comes in and you know with lower friction costs,  the propensity to trade more is there. So sometimes that’s a perfect example of perhaps the increase in tax revenues won’t come from a tax hike but rather a tax rate reduction production,” Go said.

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This follows after the House of Representative approved on third reading House Bill  9277 or the proposed Capital Markets Efficiency Promotion Act.

The measure seeks to reduce the tax on dividends of foreign non-residents from 25 percent to 10 percent.

Go said the measure is part of the government’s efforts to improve the capital market.

“We have made recommendations and taken action on various measures aimed at reducing friction costs, improving liquidity, and of course, ultimately, the ease of doing business. We have successfully delivered on the following recommendation so far – we have shortened the settlement cycle, from three days to two days. We have shortened the IPO (initial public offering) review timeline, from four to six months to just 45 days and we’ve also simplified the IPO filing requirements,” he said.

Go said his office is working on more reforms in the stock market such as allowing 15 minutes after hours the volume weighted average price trading.

“Right now, it happens the next trading day which is not a good global practice,” he added.

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