DST bill seen to provide small investors other investment options

Despite its pro-business tone, the bill seeking to rationalize the structure of the documentary stamp tax (DST) has a far-reaching impact that would provide even small investors an alternative investment option instead of getting duped by illegal pyramid schemes.

This was stressed by Sen. Ralph Recto, the main sponsor of Senate Bill 2518 or the Documentary Stamp Tax Bill which he filed at the Senate earlier this month.

He said the bill, which would amend certain provisions of the National Internal Revenue Code of 1997, is "not intended to solely benefit the dukedoms of finance, the barons of the bourse, or the lords of banking."

"This is a bill that aims to break investment barriers, remove distortions from the domestic capital market, develop it, mobilize savings, and hopefully, alleviate poverty," Recto pointed out.

He said the bill, when enacted into law, would provide small investors access to credible financial instruments such as Treasury bills, bonds, shares of stocks and fixed-income instruments to allow them to save and gain greater security on their investments.

"It is all about discouraging him from putting his life savings in pseudo-investment companies like Multitel or MMG or Tibayan and instead, invest it in higher-yield equities or debt instruments," Recto said.

The Philippine Stock Exchange (PSE) has endorsed the bill since this would lower the transaction cost in stock trading, effectively attracting more investors in the still struggling local stock market.

Under the bill, the DST rate will be reduced on the original issuance of shares and certificates of stocks from P2 to P1 for every P200 or fraction of par value, and increased for original issuance of debt instruments from 30 centavos for every P200 or fraction of face value to P1 for every P200 or fraction of issue price.

"This will level the playing field between two alternative investment options, stock and debt. By taking out the distortions, we are allowing market forces to work and broaden the options of the investors," Recto explained.

He added the proposal reduces the cost of starting and expanding a business, thereby encouraging more investments and allowing for greater opportunities to expand.

Moreover, he said the bill would lead to a revenue measure expected to rake in net revenues of P7.6 billion for the government’s coffers, more than the estimated P500 million the Department of Finance had originally proposed.