How does cutting taxes generate more revenue? CMEPA’s math could reshape Philippine infrastructure financing.
The Capital Markets Efficiency Promotion Act cuts taxes dramatically while generating billions more in government revenue. The Department of Finance projects CMEPA will produce over ₱25 billion in net revenues from 2025 to 2030—money that flows directly into the Philippines’ infrastructure agenda.
The lower-rates, higher-revenue formula
CMEPA’s revenue generation relies on lower transaction costs attracting more participants. The Stock Transaction Tax drops from 0.6% to 0.1%, but the Department of Finance expects trading volumes to surge enough that total collections increase.
Philippine Stock Exchange data shows consistent trading volume growth since CMEPA’s July implementation, with daily average values trending upward. More transactions at lower rates generate more total revenue than fewer transactions at punitive rates.
The law doesn’t just reduce existing taxes—it brings previously reluctant investors into the formal market. Small investors who avoided stocks due to high costs now participate more actively. Foreign investors who bypassed Philippine markets due to uncompetitive transaction costs are reconsidering allocations.
Multiple revenue streams
CMEPA’s revenue boost comes from several sources beyond increased stock trading. The standardized 20% withholding tax on interest income eliminates previous exemptions and preferential rates. By closing these gaps, the government captures revenue from previously undertaxed financial transactions.
Lower transaction costs make public equity financing more attractive, encouraging more companies to choose IPOs over bank loans or foreign listings. Each new listing generates Documentary Stamp Tax revenue, while increased trading produces ongoing transaction tax collections.
Feeding infrastructure
The ₱25+ billion CMEPA revenue flows into the government’s “Build Better More” infrastructure program, encompassing hundreds of projects worth trillions of pesos. From the Metro Manila Subway to provincial highways, from flood control systems to digital connectivity initiatives, these projects require sustained funding.
CMEPA’s contribution represents sustainable, recurring revenue that doesn’t require additional borrowing. This reduces the government’s reliance on debt financing for development projects, improving fiscal sustainability while maintaining infrastructure momentum.
The revenue timing aligns with infrastructure spending patterns. Major projects require steady funding flows over multiple years, matching CMEPA’s projected revenue stream through 2030. This creates predictable financing for long-term development commitments.
Regional competitiveness
By making Philippine capital markets more competitive with regional peers, CMEPA helps attract foreign investment flows that generate additional economic activity and tax revenue. Singapore, Malaysia, and Thailand have long benefited from investor-friendly tax structures that attracted both individual and institutional capital.
The Department of Finance estimates enhanced market competitiveness could attract billions in additional foreign investment over the next decade. This broadens the overall tax base supporting government operations and development spending.
Foreign portfolio investment also strengthens the peso and reduces external financing costs for government infrastructure projects. When international investors find Philippine markets more attractive, it reduces pressure on the exchange rate and potentially lowers borrowing costs.
Market-Based Development Finance
CMEPA represents a shift toward market-based development financing that reduces reliance on traditional government revenue sources. Instead of raising income taxes or VAT to fund infrastructure, the law generates revenue by encouraging productive economic activity.
This approach expands economic participation rather than extracting more resources from existing activity. Better infrastructure funded through CMEPA revenues supports economic growth, which increases trading activity and investment returns, generating more revenue for future infrastructure needs.
CMEPA’s ₱25 billion revenue projection demonstrates a new model for development finance that leverages market efficiency to support national priorities. By making capital markets work better, the law generates resources for the physical infrastructure that supports economic growth, creating a cycle where better financial markets fund better infrastructure.
