Manila: Finance Secretary Ralph Recto announced the enactment of Republic Act (RA) 12214, also known as the Capital Markets Efficiency Promotion Act (CMEPA), which is set to encourage ordinary Filipinos to invest in the Philippine capital markets.
According to Philippines News Agency, Secretary Recto expressed gratitude to the President for signing CMEPA into law, highlighting its role as a significant reform that brings capital market investments closer to Filipinos. The law aims to make investment channels clearer, more affordable, and accessible, especially for small investors, thereby fostering financial inclusion.
RA 12214 supports President Ferdinand R. Marcos Jr.'s agenda of promoting long-term economic growth and prosperity for the nation. By modernizing the tax system on passive income, the law aims to make it more competitive and investor-friendly. Key features include standardizing the tax on interest income at 20 percent, reducing the Stock Transaction Tax from 0.6 percent to 0.1 percent, and adjusting the Documentary Stamp Tax on the original issue of shares of stock from 1 percent to 0.75 percent.
Additionally, the law exempts certain transactions involving mutual funds and investment trust funds from the Documentary Stamp Tax. These measures are expected to reduce transaction costs, boost market liquidity, and enhance the competitiveness of the country's equities market. CMEPA also imposes a uniform tax rate on bonds and securities issued in foreign countries, aiming for neutrality in the tax system.
The law further defines 'passive income' and expands the definition of 'securities' for consistent tax treatment. It provides tax incentives to employers who match employee contributions to Personal Equity and Retirement Accounts. However, it repeals tax exemptions for pick-up trucks not used for livelihood purposes and for government-owned and controlled corporations' passive income.
To ensure alignment with broader economic objectives, the President exercised his line-item veto power on certain provisions. This included retaining tax exemptions for nonresident income from Foreign Currency Deposit Units and for the Philippine Charity Sweepstakes Office games to support public welfare programs. Tax exemptions for the Philippine Guarantee Corporation were also maintained to support affordable housing.
CMEPA is projected to generate over PHP25 billion in revenue from 2025 to 2030, aiding in reducing the fiscal deficit to 3.8 percent of GDP by 2028. Recto emphasized that the tax collected will fund priority projects in infrastructure, health, education, and other public services, marking it as a victory for inclusive, long-term growth.
