BIR defers higher tax on block sales

The Bureau of Internal Revenue has suspended the implementation of a memorandum circular subjecting block sales involving listed securities to as much as 10 percent capital gains tax.

The suspension is an offshoot of the strong objection posed by the Philippine Stock Exchange (PSE) against the BIR ruling, which capital market players claim would stunt the growth of the equities market and result in foregone revenues for the government.

PSE president Francis Lim said the exchange will file its position paper, requesting for the permanent cancellation of the BIR ruling and the reinstatement of the current stock transaction tax which charges — of one percent of the total gross value. 

“We are working with the Department of Finance to have the directive reconsidered,” Lim said.

Lim said the market has been adversely affected by the BIR ruling with the daily average value turnover falling to P3.9 billion from P5.4 billion.

“This is really a concern for us. It would drive away potential investors,” Lim said.

The BIR, the biggest revenue earner among line agencies, has been pressured to meet its tax collection target this year to help meet the government’s deficit-reduction goal.

Tax collections in the first nine months of the year amounted to P521.9 billion, P45 billion short of the Department Budget Coordination Committee’s (DBCC) target of P566.902 billion. DBCC is the interagency body tasked with setting the government’s fiscal and macroeconomic targets.

Internal Revenue Deputy Commissioner Nelson Aspe said the implementation of the RMC has been recalled for further study.”

The BIR, he said, would assess first the impact of the planned tax measure on the development of the local equities market.

Under the issuance, the BIR said the sale of shares of stock where the sale is prearranged or the buyer is predetermined is subject to the capital gains tax, not to the stock transaction tax.

Accordingly, any transaction, which in effect excluded the public by any means from taking part in the trading, shall be subject to the capital gains tax.

The issuance covers cases of block sale which is defined in the Implementing Rules and regulations of the Securities Regulation Code as a matched trade that does not go through the automated order matching system of an Exchange trading system.        – With Iris Gonzales