Press Release
February 3, 2009

ANGARA PROPOSES PERMANENT DOCUMENTARY STAMPTAX (DST) EXEMPTION OF STOCK SHARES

Senator Edgardo J. Angara today said there is a need to eliminate trading friction costs as it will attract more foreign investments and encourage domestic trading activity which will spell a positive economic growth for the country.

"The Philippines has the highest transaction cost for transfer of shares as compared to Hong Kong, Thailand and Singapore. Any additional friction cost will provide a major disincentive against investments, making our goal of enhancing liquidity and turnover in the stock market more difficult to achieve," said Angara, who chairs Senate Committee on Banks, Financial Institutions and Currencies.

As of now, the Philippines ranks among the highest in the region in terms of trading friction costs given the high stock transaction tax of 0.50% imposed on the gross transaction value of trades through the Philippine Stock Exchange.

Republic Act No. 9243 or An Act Rationalizing the Provisions on the Documentary StampTax under the National Internal Revenue Code of 1998, suspended the imposition of DST on the sale, barter or exchange of shares of stock listed and traded through the local stock exchange for a period of five years. The period of suspension will expire in March 2009.

With this, Angara filed a bill which seeks to permanently exempt the sale, barter or exchange of shares of stocks listed and traded through the local stock exchange from the documentary stamptax (DST).

"Studies conducted by the Philippine Stock Exchange show that a re-imposition of the DST of P0.75 for every P200 par value on the secondary trading through checall the stock exchange of shares of stock will result in investors paying more per trade in exchange," Angara noted.

A study on Financial Sector Taxation Policy Discussion and Recommendations by Dr. Felipe M. Medalla in June 30, 2007 stated that in a neutral tax system, transaction taxes such as DST are discouraged whereas consumption taxes which encourage savings are favored. The study concluded that in the absence of any movement in the stock exchange transactions, any abolition of taxes would improve stock exchange conditions at little revenue loss.

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