Treasure on the road less traveled: CMEPA's promise for Filipino investors

PUBLIC CLAMOR erupted on July 1 after the government announced the implementation of the Republic Act No. 12214 or the Capital Markets Efficiency Promotion Act (CMEPA) countrywide.

- By Matthew Miguel L. Castillo

Filipinos complained of a seemingly new tax, entailed by the law, targeting their passively held savings in banks. This emerged as the law’s primary point of impression on the people which led to widespread verbal dismissals of its entirety.

But there are no new taxes.

Instead, CMEPA introduces a simpler, fairer, and more efficient income tax system to encourage saving and to boost capital markets in the Philippines.

The law aims to boost capital markets, increase market participation, improve liquidity, and lower transaction costs. However, such objectives have been greatly overshadowed by the law’s final withholding tax (FWT) component, leading it to be tagged as another moneymaking scheme that only favors greedy lawmakers.

Regardless of the backlash it received, the CMEPA has already changed the game in the Philippine banking landscape — a reality that investors and depositors will inevitably face.

VAGUE DIRECTIONS

Michael Gerard D. Enriquez, president of Sun Life Investment Management and Trust Corp., said that the immediate negative feedback came from a lapse in communication to the public.

“It was misconstrued that it would withhold taxes on deposits or investments as a whole,” he told BusinessWorld during a Zoom interview, saying that a lot got surprised in hearing this.

BDO Capital and Investment Corp. President Eduardo V. Francisco said in an email that the public thought a new 20% tax on investments and deposits will be added, which “has already been in place for a long time.”

“They should make it clearer next time for communication that [the tax] is only on the interest,” Mr. Enriquez added.

Taxes on interest earnings of deposits and other interest-bearing accounts have been in effect in cascading tiers according to time kept before CMEPA came in.