BIR hikes tax on block sales coursed through PSE

The Bureau of Internal Revenue on Monday decided to increase the tax on block sales coursed through the Philippine Stock Exchange as it tries to reduce its huge tax collection shortfall. BIR Commissioner Lilian Hefti said the block sale of shares of stock listed at the PSE would now be subject to tax ranging from five percent to 10 percent. Transactions at the stock exchange are normally charged a stock transaction tax of one-half of one percent. “In order to make-up with modern development and more importantly give emphasis on the economic as well as substantial aspect than on the formal portion of the transaction, sale of shares of stock where the sale is prearranged or the buyer is predetermined is subject to the capital gains tax, not to the stock transaction tax, notwithstanding the fact that the transaction passed through the Exchange or the said facility was used," Hefti said. She added that any pre-arranged transaction of PSE-listed shares or where the buyer is predetermined and excluding the public would be subject to the capital gains tax. “The fundamental principle underlying this preferential treatment was and still is the national objective of promoting the development of the domestic capital market by means of enticing the general public to take part in the trading in the local stock exchange," the BIR chief said. A block sale is defined as a matched trade that has been pre-arranged by and among the broker dealer’s clients which does not go through the automated order matching system of an Exchange trading system. In August of 2005, then BIR Commissioner Jose Mario Bunag issued RMC 43-2005 replacing the stock transaction tax of one-half of one percent of the total value imposed on pre-arranged or pre-determined transactions such as block sales with the capital gains tax. A month later, Bunag issued RMC 46-2005 suspending the implementation of the ruling after the PSE and its member brokers warned that the shift to capital gains tax would undermine the development of the local equities market. The following month, the ruling was scrapped with finality through RMC 56-2005. The BIR is tasked to collect P765.9 billion this year or about 17.5 percent higher than last year’s P651.9 billion. However, the agency’s tax take from January to October this year was P54.1 billion short of the P629.5 billion target. - GMANews.TV