Senator bats for lower stock taxes

Senate Majority Leader Loren Legarda is pushing for lower taxes on the trading of listed shares of stock, saying the local equities market "deserves as much support as Congress can lend it at this difficult time."

Legarda endorsed the Philippine Stock Exchange (PSE) proposal for the outright removal of the documentary stamp tax (DST) on the purchase of stocks, instead of a simple reduction in the tax.

"We must promote the stock market not only as a source of capital for business expansion, but also as an alternative and viable place where ordinary Filipinos can save and invest some of their disposable income," Legarda said.

At present, share buyers are levied a DST of P1.50 for every P200 par value of the stock.

To illustrate, an investor who buys 5,000 shares of Petron Corp. at P1.64 per share (for an investment of P8,200) would have to pay a DST of P37.50, based on the P1.00 per share value of the oil firm’s stock, or a total par value of P5,000 for the purchase.

A pending bill seeks to reduce the DST to only P1 for every P200 par value. The PSE, however, is insisting that the tax be scrapped totally.

Legarda, meanwhile, endorsed another proposal to reduce the stock transaction tax (STT) to one-fourth of one percent of the transaction value.

Shares sellers currently pay an STT of one-half of one percent of the transaction value.

This means that when 5,000 Petron shares are sold at P1.78 per share (for a transaction value of P8,900), the seller pays an STT of P44.50.

On top of the DST and the STT, stock market investors have to pay the usual 1.5 percent broker’s commission (plus 10 percent value-added tax on the commission), the P110 transfer fee for each new stock certificate issued, the P20 cancellation fee for each certificate sold and certificate lodging fees with the central depository.

Legarda earlier also endorsed the PSE proposal for the abolition of the 10 percent tax on cash dividends paid by listed firms to their shareholders.

In another development, Legarda said the country badly needs a Charles Merrill to inspire more Filipinos to invest in the local stock market, and in the process, lure people away from pyramiding, ponzi and other investment scams.

"One of the lessons we’ve learned from the scourge of investment and securities fraud is that there are thousands of middle class Filipinos who have investible funds and seem to be looking for higher-yielding instruments," Legarda said.

"Apparently, many Filipinos, including retirees, are not satisfied with the yields offered by traditional bank certificates of time deposit and common trust funds," Legarda pointed out.

The late Charles Merrill founded what is now known as Merrill Lynch & Co. He was the first person to openly advocate that the stock market should be an avenue for ordinary Americans, and not just be a playground for Wall Street insiders.

Merrill brought the stock market to the average American household. He "preached the gospel of stocks" at county fairs, shopping centers and even in door-to-door campaigns across the US.

He went to the extent of setting up makeshift day-care centers during informal forums on stock market investing so that husbands and wives could both attend.

As a result of Merrill’s crusade, just every working American is now invested directly in stocks, or indirectly via mutual funds in their retirement accounts.

The National Bureau of Investigation earlier said Filipinos have lost as up to P120 billion to several big pyramiding and ponzi scams. This includes P25 billion lost to Multinational Telecom Investors Corp., another P20 billion lost to the Mateo Management Group and P3 billion lost to the Tibayan Group of Companies.