CMEPA targets the wealthy, not ordinary Filipinos

The Department of Finance (DOF) has issued an important clarification to calm fears and correct misunderstandings about the newly signed Capital Markets Efficiency Promotion Act (CMEPA).

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Contrary to some alarming and misleading claims, this law is not a new tax on the savings of ordinary Filipinos. Rather, it corrects a longstanding imbalance in our tax system that has benefited the very wealthy at the expense of fairness.

The core of CMEPA is tax fairness and efficiency. For years, the Philippines has imposed a 20 percent final withholding tax on interest income earned from regular bank deposits. This is the tax paid by most ordinary savers—workers, retirees, small entrepreneurs—on the interest their savings earn in banks. Meanwhile, those with access to more sophisticated financial instruments, such as bonds or other fixed-income securities, often paid a much lower tax rate—sometimes as low as 10 percent or 15 percent—on the same kind of income.