Finance Secretary Jose Isidro Camacho said the version approved by the bicameral conference committee eliminated the documentary stamp tax (DST) on the secondary trading of debt and equity instruments to allow the growth of the domestic capital market.
The committee also approved the recomputation of the DST on financial instruments, including insurance and pre-need policies, debt instruments and equity instruments.
The applicable DST on the primary issuance of debt instruments has been raised from 30 centavos to P1, while the DST on the primary issuance of equity papers has been decreased from P2 to P1.
Camacho said the applicable DST on insurance and pre-need policies was also adjusted. "Right now, we’re calculating the DST as a percentage of the insurance policy and annuities," he said. "Under the new law, the tax will be based on the premium."
These adjustments, Camacho said, would generate a net revenue of P4.9 billion. The adjustment of the DST on equity papers would generate a revenue loss of P170 million in the primary issue and an additional loss of P1.18 billion in the secondary issue.
However, the adjustment of the DST on debt papers would generate an additional P1.4 billion from privately-issued instruments and a total of P1.9 billion from government securities.
"I’m very pleased that the bicam committee has approved this version of the DST bill and I hope it becomes a law soon," Camacho said. "This will have two impacts: it will help develop the capital markets and we will be able to generate revenues because we are plugging loopholes in the existing law."
Camacho explained that at present, the DST is a disincentive that has prevented the development of the secondary market. "This will allow private companies to have access to the debt and capital market which for the private sector is non-existent. They are totally reliant on bank loans whenever they need capital."
The new law, he said, would give an expanded selection of instruments which will now include fixed rate instruments and longer term issuances. Before the adjustment in the DST law, these instruments were not an option because they ended up being more expensive than bank loans.