Senator Win Gatchalian is seeking to encourage more Filipinos to invest in the local capital and debt market by simplifying and harmonizing taxes on passive income and financial intermediary taxes.
Gatchalian, who chairs the Senate Committee on Ways and Means, said that Senate Bill 1347 or the Passive Income and Financial Intermediary Taxation Act (PIFITA) will essentially cut the cost of raising capital and debt by reducing the number of tax bases and rates applicable to passive income, financial intermediaries, and financial transactions.
The goal of the measure is to level the field among players with better pricing information by removing tax-induced distortions and is expected to discourage arbitrage opportunities.
“There is a need to rationalize the taxation of the financial sector to provide better pricing information to market actors and facilitate the long-term growth and development of our economy,” Gatchalian said.
If enacted into law, the measure will reduce the number of final withholding tax rates, unify tax rates on passive income, harmonize business taxes on financial intermediaries, and rationalize documentary stamp tax.
“We earnestly hope that this measure will enhance capital and debt market development in the country and encourage more Filipinos to invest in our formal financial markets,” he emphasized.
He noted that the Philippines scored only 2.25 out of a possible score of 5 based on the 2017 Mckinsey Asian Capital Markets Development Index. Based on the same study, the cost of raising equity in the country is more than 14%, caused mainly by friction costs, which are the direct or indirect costs associated with the execution of a financial transaction, including taxes, commissions, and other fees.
“Malaki ang papel ng ating financial sector sa pangmatagalang paglago ng pambansang ekonomiya. Ang panukalang batas na ito ay isang pagkilala sa pangangailangan ng isang mas simple at patas na pagbubuwis sa mga transaksyon na may kinalaman sa ating capital at debt markets,” Gatchalian ended.