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The Department of Finance (DOF) is encouraging Filipinos to diversify their investment portfolios, citing the new Capital Markets Efficiency Promotion Act (CMEPA) as a means to reduce transaction costs and make investing more accessible. The law aims to lower barriers to entry for investors in the capital markets, aligning with the DOF’s push for financial literacy and inclusion.
Ralph G. Recto
Finance Secretary Ralph G. Recto stated, “There is no truth that CMEPA discourages people from saving and investing. Actually, CMEPA is not just a revenue bill, but an act to boost our capital markets and allow for greater participation, especially among ordinary Filipinos.”
He emphasised that investing is now “for every Filipino who dreams of financial security and a better future”. Ralph also suggested other government savings programmes, such as Pag-IBIG MP2 savings and Retail Treasury Bonds (RTBs), as investment options.
The Bangko Sentral ng Pilipinas (BSP) 2021 Financial Inclusion Survey indicated that only about 8 million out of 77 million Filipino adults owned investment products. Before CMEPA’s implementation, the Philippines had the highest Stock Transaction Tax (STT) in ASEAN at 0.6%. CMEPA has reduced the STT on the sale or exchange of shares to 0.1%, aiming to make investing in the Philippine Stock Exchange (PSE) more cost-competitive.
Additionally, CMEPA has reduced the Documentary Stamp Tax (DST) on the original issuance of shares by corporations from 1% to 0.75%, which aims to lower the cost of capital. The DST on Mutual Funds and Unit Investment Trust Funds (UITFs) is now tax-exempt.
These pooled investment schemes allow investors to access a broader range of asset types and share risks and benefits. The tax on interest income is now a uniform final withholding tax (FWT) rate of 20%, regardless of the financial instrument’s tenure.
Finally, the removal of tax exemptions on passive income earned by Government-Owned and Controlled Corporations (GOCCs) is expected to increase revenue collections for public services.
