Higher stock tax seen to crimp PSE growth
By Arra B. Francia, Reporter
FUND MANAGERS are worried the hike in stock transaction tax (STT), which will be implemented on Jan. 1, may hamper the Philippine Stock Exchange’s (PSE) growth.
The increase in STT is part of the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which takes effect next week. The STT will increase by 20% to 60 basis points (bps), or six-tenths of 1%, from 50 bps of the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged, or otherwise disposed.
“The STT applies to every sale, barter, exchange or other disposition of shares of stock listed and traded through a local stock exchange, other than sale by a dealer in securities, and shall be paid by the seller or transferor,” the PSE said in a memorandum dated Dec. 26.
While the stock exchange is seen to generate an additional P1.7 billion in revenues annually, the higher STT may turn off investors.
“My initial thoughts are that it will slightly reduce trading volume. It increases both risk and friction cost,” First Metro Asset Management, Inc. President Augusto M. Cosio said in a text message.
PSE President Ramon S. Monzon earlier this month said the higher STT will affect the competitiveness of the Philippine stock market.
“What we have to understand is the PSE does not operate in the local market alone. We really compete with the other exchanges, Thailand, Malaysia, Indonesia, Vietnam. We compete for the money of the foreign investors. So when you increase STT, you are increasing the friction cost. As it is right now, before the increase that 50bps STT is already one of the highest in the region,” Mr. Monzon said.
The PSE currently has the highest STT among regional markets, followed by the Burma Malaysia Exchange with a tax of 30bps of the transaction value. Meanwhile, the Hong Kong Exchange charges a stamp duty of 10bps of the transaction value, with the Singapore exchange does not have a stock transaction tax.
“It might hamper capital market growth. I would have preferred they increased taxes on unlisted securities,” BDO Capital and Investment Corp. President Eduardo V. Francisco said in a text message.
For his part, Summit Securities, Inc. President said while the market can bear the STT increase, it would have been better to maintain it at its current level.
“I don’t think it’s something big. If it’s something big, if it’s 0.06% then I think we can bear it… But I just wish they can maintain it and push for more volume instead,” Mr. Liu said.
Timson Securities, Inc. Marketing Head Mark Levinson R. Koa noted the move can also deter active day and swing traders’ from trading more, since the higher taxes would make it harder to generate profits.
“To combat the possible negative effects of the higher taxes, PSE can finally launch short-selling and other derivative products in 2018. These new and exciting investment options might just be the key to invite more trading participants into our local stock market,” Mr. Koa said in a text message.
Mr. Monzon earlier short selling will be one of the initiatives they are planning to launch in 2018 to entice more foreign investors into the PSE.
“We are really embarking on a lot of new initiatives that will make it more attractive to the foreign investors. We’ll try to launch short selling, and the securities borrowing and lending for the first quarter next year. We plan to launch new indices… That would make out market more attractive to foreign investors,” the PSE president explained.