Legislators Urged to Amend CMEPA

Cielo Magno, the former Finance undersecretary for fiscal policy and monitoring who has returned to the academe and is currently an associate professor at the University of the Philippines School of Economics, is urging government to return the controversial Capital Markets Efficiency Promotion Act or CMEPA to Congress to amend certain provisions that may discourage long-term savings.

- MARIANNE GO

In a briefing for members of the Monday Circle at the Westin Manila Hotel in Ortigas, Magno explained that the imposition of the 20 percent tax on interest earnings was actually proposed during the time of former president Rodrigo Duterte as part of the Passive Income and Financial Intermediary Taxation Act or PIFITA, and the idea was to boost the capital markets.

However, at the time, she said, the challenge for the Department of Finance was to minimize a revenue impact of policies.

The CMEPA, she pointed out, unfortunately doesn't really just focus on the capital markets. She cited a provision that repeals the exemption of pickup trucks that will subject buyers to pay excise tax. As such, she believes that CMEPA is "a combination of different policies that try to produce a law that will have a neutral impact on the revenue."

She agrees with the government's move to lower the transaction costs with respect to the stocks and bonds, and the removal of documentary stamps. But during her time with the DOF, they were looking more on how to lower the tax on interest earnings to 15 percent, acknowledging that doing so would have a significant impact on government revenue.

"But for us, theoretically, that's what makes sense, right? You lower the tax on savings because on the regional level we're one of the countries that have the lowest savings rate. Right now, it's only around 27, 29 percent compared to the average in the region, which is 35 percent. Malaysia, Indonesia, is at 35 percent and Singapore is 40 percent. So, we need savings, obviously, because that's how we get our investments, right?"