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Arroyo Backs Stock Market Tax Cuts

by Mary Swire,, Hong Kong

12 November 2008

Officials at the Philippine Stock Exchange (PSE) have expressed their delight at the news that the country's President, Gloria Arroyo, is supporting their request for a tax cut on stock trading transactions.

An appeal for a reduction on transaction-related tax burdens was made by the PSE recently to try and stem the falling number of share sales as a result of the financial constraints felt by businesses amid the current economic climate.

It is now hoped that President Arroyo's positive response will be reflected by Congress, whose final approval on the proposal must be sought in order for it to become law.

The legislation would lower the current 0.5% rate of tax on stock transaction sales to 0.25%, which the PSE hopes would increase market activity.

Currently, this 0.5% levy on the gross value of share sales is amongst the highest in the world, and some concern has been voiced over whether a drop in this surcharge will result in a loss of revenue for the government; although it is hoped that additional revenue from increased stock market activity will cover any revenue lost by the introduction of the tax break.

In addition to the appeal for a reduction on transaction tax, the PSE has also expressed a desire to extend the current exemption of Document Stamp Tax (DST) on the sale of secondary trading shares, which has been in place for the past five years. If Congress decide to reinstate the DST when its exemption expires in March 2009, then all secondary trading of shares will go back to being subject to a PHP0.75 charge per PHP200 (USD4) of stock traded.

The PSE's President, Francis Ed Lim has broadcast his delight at President Arroyo's display of support, citing it as a positive move in the right direction for the future of the country's stock exchange.

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