MANILA, Philippines — The Department of Finance (DOF) is confident that the government’s initiatives in strengthening the country’s capital markets will lead to a stronger Philippine economy.
In a statement released on Tuesday (May 25), DOF Secretary Carlos Dominguez III has stated that “the reforms being initiated and pushed by the Duterte administration to further deepen the Philippines’ capital markets will let the economy emerge stronger and more resilient in the aftermath of the prolonged COVID-19 pandemic.”
The statement also quoted Dominguez saying that “these reforms aimed at building a ‘truly broad-based and inclusive financial system fit for the 21st century’ include the proposed Capital Market Development Act and simplifying the taxation of passive income and financial services and transactions.”
The Finance chief noted that these reforms require the approval of Congress.
He, however, added that the DOF and the Capital Market Development Council (CMDC), which he chairs, have initiated several measures to make the processes in the financial system more efficient and accessible to both bond issuers and retail investors.
Among these initiatives is the recent launch of the electronic Securities Issues Portal (e-SIP) by the Philippine Dealing System (PDS), which had Ayala Land Inc. (ALI) as its pioneer corporate bond issuer.
Another initiative is the introduction of mobile software such as the Bonds.PH and Overseas Filipino Bank apps, which have allowed the Bureau of the Treasury (BTr) to widen its reach to individual investors in offering government bonds.
“All these efforts should open the door to a steady stream of new listings and new investment products. We are very optimistic to bounce back from the COVID-19 crisis stronger and more resilient than ever. The capital markets, I believe, will lead us in this recovery,” Dominguez said at the opening of the virtual Initial Public Offering (IPO) Forum organized by the Philippine Stock Exchange (PSE).
The online forum, held as part of the PSE’s information campaign on the amended listing rules of its Main, and Small, Medium, and Emerging Boards, discussed the advantages and expansion opportunities for small, medium enterprises (SMEs) in the stock market.
The DOF said, “the proposed Capital Market Development Act now pending in Congress seeks to develop a sustainable corporate pension system to help secure the future of Filipino workers and their families while making more capital available in the financial sector to stimulate economic growth.”
Another priority measure that the DOF is lobbying Congress to pass this year is the bill simplifying the taxation of passive income and financial intermediaries, the DOF said.
Passive income is any income that requires no effort to earn and maintain and where the earner expends little effort to grow the income. It includes rental income and any business activities in which the earner does not materially participate.
A financial intermediary, on the other hand, is an institution or individual that serves as a middleman among diverse parties in order to facilitate financial transactions. Common types include commercial banks, investment banks, stockbrokers, pooled investment funds, and stock exchanges.
Dominguez said this proposal that aimed at reducing the number of combinations of tax bases and rates in the financial sector from 80 to about 40, represents Package 4 of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).
“Package 4 aims to shift from the traditional bank-centric funding to capital market financing. It will help us provide long-term funding for our infrastructure program,” Dominguez said. “With their high multiplier effect, infrastructure investments will be the cornerstone of our economic recovery.”
Dominguez also assured that as CMDC chairman, he is committed to doing his utmost for “better investor protection, improved corporate governance, the centricity of shareholders, and broader investor participation.”