THE Division of Finance (DoF) stated on Monday that the Home of Representatives model of a capital markets reform invoice might lead to a P140 billion discount in authorities income over 4 years, additional limiting the fiscal house obtainable.
Finance Assistant Secretary Karlo Fermin S. Adriano stated the DoF is open to slicing inventory transaction taxes to 0.1% from 0.6% and decreasing the dividends tax price for non-resident traders.
However, he urged legislators to contemplate the DoF’s fourth package deal of the Complete Tax Reform Program, including that amendments contained within the Home-proposed Capital Markets Effectivity Promotion Act (CMEPA) are already included within the DoF-submitted laws. The DoF’s model, he stated, might web about P10.76 billion.
“The DoF acknowledges the intent of the proposed CMEPA, however we’re already pursuing related goals by the Passive Earnings and Monetary Middleman Taxation Act (PIFITA),” he stated in a Senate methods and means committee listening to.
“We’re okay now with decreasing the inventory transaction tax from 0.6% to 0.1%… we’re (additionally) okay with decreasing the dividends significantly for non-residents, which can also be lined by CMEPA,” he added.
CMEPA and PIFITA are among the many legislative priorities outlined of President Ferdinand R. Marcos, Jr. for the 19th Congress. The Home accredited each the payments on ultimate studying whereas the Senate’s variations stay on the committee stage.
“Provided that at the moment we’re nonetheless in a decent fiscal place, we hope that we might push for Bundle 4 as a substitute of CMEPA, particularly that most of the capital market provisions in CMEPA are additionally present in Bundle 4,” Mr. Adriano stated.
The DoF’s Bundle 4, previously often known as PIFITA, is looking for to levy a flat 20% tax price on curiosity revenue, together with financial savings deposits, treasury bonds and payments, and company bonds, amongst others, based on Mr. Adriano’s presentation to the tax panel.
The DoF’s fourth package deal additionally gives for a 5% gross receipts tax on banks, lending traders and different monetary intermediaries’ lending and non-lending actions. It additionally proposes a 2% value-added tax (VAT) on well being upkeep organizations and pension funds.
Being attentive to the DoF’s place on the measure, Senator Sherwin T. Gatchalian, who heads the Senate methods and means committee, stated the Legislative-Government Growth Advisory Council (LEDAC) is now pushing for capital market tax reforms as a substitute of the extra expansive PIFITA.
Home Invoice (HB) No. 9277, or the CMEPA measure, seeks to chop inventory transaction tax to 0.1% from 0.6% at the moment. The measure additionally proposes to set the dividend tax price for non-resident traders to 10% whereas eradicating the 7% gross receipts taxes on spinoff positive aspects by monetary establishments.
It additionally lowered tax charges on lotto winnings above P10,000 to 10% from 20%. The Home’s CMEPA model additionally exempted property insurance coverage insurance policies price lower than P100,000 from documentary stamp tax whereas levying a most P200 tax on insurance policies greater than P1 million.
The Senate’s model of CMEPA consists of tax overhauls to “the debt sector, bonds and debentures… and in addition your complete insurance coverage business,” based on Mr. Gatchalian, citing their interconnectedness to capital markets.
The DoF is open to working with the capital market reforms invoice, requesting that Congress tweak the tax measure to make it “income impartial,” Mr. Adriano stated.
He famous the DoF tried including tax provisions that might make CMEPA revenue-positive for the federal government. “We tried to insert provisions… mainly giving us optimistic income, together with the gross receipts tax on monetary intermediaries and excise tax on pickup (vans).”
“It’s nonetheless not sufficient to counter the income adverse impression of CMEPA,” he added.
Mr. Gatchalian stated the Senate model of the measure would solely lead to P78 billion in foregone income, with no discount in tax charges for lotto ticket gross sales and an excise tax on pickup vans. “We made some modifications in the previous couple of weeks,” he added.
It could be simpler for the Senate to pursue CMEPA because it’s a “smaller invoice” in comparison with PIFITA, he stated, citing the necessity to expedite deliberations on reforms to the capital markets and passive revenue tax buildings earlier than the chamber begins discussions on the proposed 2025 nationwide finances.
“When you ask me personally, I would like discussing CMEPA within the subsequent few months for 2 causes: one, it’s a neater invoice to debate as a result of the parts are solely few and interrelated… and second, we will simply go a smaller invoice in comparison with an even bigger invoice,” he stated. — Kenneth Christiane L. Basilio