The Philippine Stock Exchange (PSE) is pleased that President Arroyo endorsed to Congress some proposals to reduce taxes on stock trading transactions.

PSE president and chief executive officer Francis Lim said they were able to get Mrs. Arroyo's support to extend the documentary stamp tax (DST) exemption on trading and reduce the stock transaction tax. Lim noted the twin measures could lure more foreign and local investors into the market.

"Whatever revenue shortfall from the twin measures can be compensated by increased value turnover resulting from the lower transaction taxes as well as by including options and futures in the coverage of the new securities transaction tax (STT) law.  We are optimistic that whatever foregone revenues the government will incur because of these tax measures will be recouped through more trading activity in the exchange," he said in a statement.

Upon her signing of the Credit Information System Act (CISA), President Arroyo urged Congress to look into PSE's proposals, saying it entice more investors to come into the country and stimulate market activity.

“We acknowledge the proposals of the PSE to strengthen our equity markets as well aside from the credit markets that we are strengthening today. We ask Congress to look closely at their suggestions that require legislation,” she said.

The proposals

From 0.5 percent, the PSE has proposed that sellers of shares of stock be charged with a transaction tax equal to 0.25 percent of the gross value of shares being sold. Lim said that this will provide a significant boost to the local bourse amid the turmoil and uncertainty in global markets.

Citing PSE data, Lim said that the average daily value turnover in the exchange has jumped from P589 million in 2003 to a record high of P5.5 billion in 2007.

As for their proposal on DST, Lim said that it was no accident that the stock market posted significant increases in 2004, a time when the government suspended its collection of DST on secondary stock trading.

In a study conducted by PSE, investors will experience an additional burden equal to 0.10 percent of the value of shares they trade at PSE should the government bring back the imposition of DST.

"We are counting on the usual support of our legislators to these capital market friendly legislative measures that will promote more investments in the country and growth in the economy," Lim said.

At present, share trading is exempted from the DST for a period of five years, or until March 2009. This was provided under Republic Act 9243, which rationalizes the provisions of the National Internal Revenue Code of 1997 on the DST. Before RA 9243's enactment in March 2004, 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 PSE.