PSE hails scrapping of DST on secondary trading of shares

MANILA, Philippines - The Philippine Stock Exchang (PSE) hailed President Arroyo’s signing into law of a landmark legislation that permanently scraps the documentary stamp tax (DST) on secondary trading of shares, a move that is expected to put the local bourse at par with neighboring countries as well as boost trading activity.

Prior to the passage of this bill, secondary trading of shares of stocks were subject to a DST equivalent of P0.75 for every P200 par value of a stock listed at the exchange.

“During a period of heightened risk aversion, bringing down the costs of doing business is a crucial trade-off to attract investments. Removing taxes such as the DST enables the country to create a favorable business climate amidst this global crisis,” PSE president and chief executive officer Francis Lim said.

“With the abolition of the DST becoming a law, I can say that we are slowly gaining ground in positioning the Exchange at par with our Asian counterparts. We in the PSE are thankful that our legislators recognize the need to grow the stock market as one of the means to strengthen the Philippine economy,” Lim further said.

The costs of investing in the local stock exchange rank among the highest compared with other markets and this has contributed to the local stock market becoming less liquid as investors are discouraged from placing their money in the stock market.

The Philippines has also consistently ranked low in terms of cost competitiveness in global surveys conducted by large foreign institutional investors.

“The law frees up liquidity which investors need in order to place their money in equities again, instead of paying DST. But more than just developing the market for the long-term, we are also aiding the government in enhancing the Philippines as an investment destination by increasing the competitiveness of our bourse relative to our Asian counterparts,” Lim said.

When share trades were exempted from DST in 2004 to March 2009, stock transaction taxes collected by the government increased 500 percent as more people invested in the stock market.

The DST Law, first introduced by Aurora Rep. Juan Edgardo Angara, is the third capital market-friendly legislation passed after the Personal and Equity Retirement Account Law and Credit Information System Law were enacted last year. 

Aside from these, the PSE is looking forward to the enactment into law of the Real Estate Investment Trust bill.