DOF: CMEPA to encourage Pinoys to diversify portfolios
The Department of Finance (DOF) said the new law that cut transaction costs for key investment products was expected to encourage Filipinos to diversify their portfolios.
The move is part of the government’s broader effort to deepen the local capital market and reduce the country’s heavy dependence on banks.
In a statement, Finance Secretary Ralph Recto said the new Capital Markets Efficiency Promotion Act (CMEPA) effectively eased the barriers that prevented small investors from entering the capital markets.
This, in turn, may prompt ordinary Filipinos to go beyond bank deposits and explore other investment products that can give them much higher returns.
“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,” Recto said.
Among the key features of CMEPA are the reductions in the stock transaction tax rate from 0.6 percent to 0.1 percent, and the documentary stamp taxes (DST) on original issuance of shares from 1 percent to 0.75 percent.
Furthermore, the DST on mutual funds and unit investment trust funds—collective investment schemes which are popular among young professionals and middle-class savers—has been removed.
However, the law’s provision that imposed a uniform 20-percent withholding tax on interest income regardless of the tenure of the financial instrument sparked intense discussions online.
CMEPA removed the tax exemption previously granted to long-term time deposits, which, the DOF said, had favored wealthy bank depositors who can afford to park their extra cash for more than five years.
For its part, the Securities and Exchange Commission (SEC) said it sees more Filipinos beefing up their retirement funds under the Personal Equity and Retirement Account (Pera) products.
Among the salient provisions of the CMEPA is the grant of a 50-percent additional tax deduction to private employers who contribute an amount equal to or greater than their employees’ Pera contributions.
Established under Republic Act No. 9505, or the Pera Act of 2008, Pera is a voluntary retirement savings program available to the public in addition to existing retirement benefits from the Social Security System, Government Service Insurance System and employer-sponsored plans.
The program offers contributors tax benefits not available in other retirement investment products.
“The CMEPA strengthens the role of Pera by offering stronger incentives for long-term savings. It encourages companies to support their employees’ retirement planning while simultaneously increasing the capital available in the financial system, stimulating the local stock market,” SEC Chair Francis Lim said.
“At its core, CMEPA is designed to align the Philippine capital markets more closely with regional peers by removing long-standing barriers to investor participation,” Lim added.
