Is the CMEPA fair to small savers, average-income Filipinos? Explained.
MANILA, Philippines — While the Capital Markets Efficiency Promotion Act (CMEPA) seeks to simplify tax rates and promote long-term savings, it has drawn a wave of misinformation—and raised legitimate concerns about its impact on ordinary Filipinos.
The Department of Finance (DOF) has defended the measure as a way to level the playing field for trade and investment. But economist and IBON Foundation executive director Sonny Africa warned that the uniform 20% tax rate on interest income would disproportionately burden small savers.
“Standardizing tax rates may sound fair but equalizing tax on interest income at 20% will be regressive in effect because ordinary savers will end up paying the same rate as the ultra-rich. The DOF is being insensitive: equal treatment of unequals is unequal in effect,” Africa told Philstar.com in a message.
Small savers still at risk, economist says. CMEPA also aims to ease investing for Filipinos by lowering levies such as the stock transaction tax and documentary stamp duties. But Africa said such reforms mainly benefit large-volume investors and brokers, not the average Filipino.
Ordinary savers, after all, could not afford the risk to enter the capital markets, Africa pointed out. They also do not have disposable income and many still lack financial literacy.
“Instead of pushing them to be investors in volatile capital markets and shifting risk to individuals, the government should give more attention to securing decent wages and basic incomes, pensions and social protections,” Africa said.
Some advisers have encouraged middle-income savers to invest through Personal Equity and Retirement Accounts (PERA), citing tax advantages. These schemes, however, transfer the burden of retirement security from the state to the individual.
“Public investment in universal pensions and healthcare will be much more effective and help more than individualized financial accounts,” Africa said.
Low-income groups still affected. The DOF has argued that higher-income groups would bear the brunt of the new tax rules. Africa rejected this as dismissive, noting that those in lower-income brackets are still affected—even if indirectly.
While CMEPA introduced a uniform 20% rate on interest income, it did so by removing tax exemptions and raising existing rates on several instruments. For instance, interest income from bank deposits held for more than five years—previously tax-exempt—is now taxed at 20%. Foreign currency deposit units, previously taxed at 15%, are also now subject to the same 20% rate.
“While they may not have been ‘targeted,’ for apparently being invisible to the DOF, they're certainly still affected,” he said.
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