More vibrant capital market seen with new CMEPA legislation

Philippine Stock Exchange trading floor  —INQUIRER FILE PHOTO

MANILA, Philippines — There may be more local capital market participation in the coming months following the enactment of a law lowering the stock transaction tax, thus broadening access to equities, according to the Securities and Exchange Commission (SEC).

Speaking to reporters on Monday, SEC Commissioner McJill Bryant Fernandez said they were “anticipating increased transactions because of the less friction cost.”

“We see that there’s a multiplier effect to that … we’ve been very supportive of that measure,” Fernandez added.

The official was referring to Republic Act No. 12214, or the Capital Markets Efficiency Promotion Act (CMEPA) that President Marcos had signed into law on May 29.

READ: BSP chief strives to deepen local capital market

Lower friction cost

Among the most highly anticipated measures in the law is the reduction of the stock transaction tax to 0.1 percent from 0.6 percent previously, a move seen to encourage trading activity and boost overall market liquidity.

This means that a trader needs to pay 0.1 percent of the gross selling price of the shares he wishes to buy through the local bourse.

For instance, if a trader wants to buy P10,000 worth of stocks, they will have to pay a P10 stock transaction tax, versus P60 previously.

Apart from this, CMEPA also slashed the documentary stamp tax on the original issue of shares from 0.75 percent to 1 percent.

“We welcome the enactment of the CMEPA, a key piece of legislation that strengthens our ability as a regulator to create an environment that not only increases capital market accessibility to more Filipinos, but also builds trust and confidence in long-term investing,” SEC Chair Emilio Aquino said in a statement on Tuesday.

READ: Understanding the Philippine stock market