BIZ BUZZ: Market woes beyond Trump tariffs
Even before the tariff bombshells dropped by United States President Donald Trump on friends and foes alike, something has been bugging some capital markets veterans.
We’re talking about one particular provision in the proposed Capital Markets Efficiency Promotion Act (CMEPA). The bill has been passed by the Bilateral Conference Committee and is only awaiting the signature of President Marcos. And whether he signs it or not, it will lapse into law by July 1.
Many parties don’t doubt that CMEPA, in general, will be good for the markets. However, there are concerns about a particular provision that subjects foreign corporations to a 25-percent tax when they buy dollar-denominated bonds carved out of the Philippines.
At present, when local corporations and financial institutions issue dollar-denominated bonds, their offshore buyers are tax-free. But once the tax exemption is removed, issuers will have to pay more premium to make their investors whole, one banker said.
“In short, our cost of borrowings will spike. So how can we grow and diversify our sources of funding?” the source lamented.
It’s no wonder that corporations with forthcoming foreign debt maturities in the next few years are now scrambling to raise money, our source said. Even those who don’t have maturities have likewise issued offshore bonds to get ahead of such “tax complication,” it was pointed out.
While the intention is to level the playing field, will it instead backfire against Philippine issuers?
“It will be deterrent to our growth,” the banker argued.
What they are hoping for is for Mr. Marcos to strike out that lone provision and allow the continued tax exemption of foreign investors. They have no qualms with the rest of the reforms espoused by CMEPA.
Especially at this time of heightened volatility in the global markets, it’s one of those Trump-proofing support they are pleading for.
The two main solutions to addressing hunger in PH