PSE to require members to follow new tax system

Despite protests mainly from foreign brokers, the Philippine Stock Exchange will require its members to shift from paying a 10-percent value-added tax (VAT) on brokers’ commission to a seven-percent gross receipts tax (GRT).

In a memorandum to brokers, PSE president Ramon T. Garcia said after several conferences between brokers’ representatives and Bureau of Internal Revenue Commissioner Rene Banez, the PSE will issue the guidelines on the shift as mandated under RA 8761 and RA 9010.

Effective April 2, 2001, the brokers’ commissions will be subject to a seven percent GRT, an indirect tax that could be passed on to clients. This replaces the 10 percent VAT, which will be charged for the last time on March 30.

However, Garcia said the brokers do not have to cancel their VAT registration as their other income like dealers’ gains, rental and miscellaneous fees are still subject to 10-percent VAT.

But brokers, mostly the foreign houses, have lodged a protest on the shift from VAT to GRT basically on the basis of the sudden inclusion of brokers in RA 8761 and the confusion on its effective date of implementation, the basis of computation, the mode of payment and stockbrokers’ ability to pass on the GRT to clients.

Prior to the passage of RA 8761 in the middle of last year, stockbrokers had been paying the VAT and were only instructed to pay the GRT retroactive to January 2000.

RA 8761 extended the imposition of the VAT on services rendered by banks, non-bank financial intermediaries, finance companies, and other finance intermediaries to Jan. 1, 2001. The ruling included stockbrokers who are required to pay the seven percent GRT instead.

"This was the first ever instance in nearly seven years that stockbrokers were included among those that should not pay the VAT as yet," the foreign brokers said.

The said law further stated that beginning Jan. 1, 2001, stockbrokers shall discontinue paying the GRT and revert to paying the 10 percent VAT which means only a one-year effectivity.

But under RA 9010 recently passed by the Arroyo administration, the period of GRT payment was reset from Jan. 1 2000 to Dec. 31, 2002, which means the shift back to the VAT will only be made effective on Jan. 1, 2003.