Key private-sector representatives are holding high-level discussions with the Department of Finance (DOF) on Monday in hopes of resolving differences in opinions relating to the taxation of certain government bonds and Philippine stocks not meeting public ownership rules.
The meeting is considered a “last-ditch effort” by the private sector, namely, the Philippine Stock Exchange (PSE) and the Bankers Association of the Philippines (BAP), which fear that some tax policies of the Bureau of Internal Revenue (BIR) are sending confusing, and ultimately negative, signals to the investment community.
The PSE and BAP had sought—and were granted—a meeting with Finance Secretary Cesar Purisima, the BIR and the Securities and Exchange Commission, PSE officials told reporters during an informal interview on Friday.
Up to now, private sector players are still hoping for an amicable solution with the DOF, PSE Chairman Jose Pardo said, despite anecdotal accounts suggesting that talks between the PSE and the government have become tense during recent sessions.
“Sometimes it is just a misunderstanding. They have fiscal pressures [but] we have to remind them about the bigger picture,” Pardo said.
Discussions are expected to focus on the 20-percent final withholding tax on the P35-billion Poverty Eradication and Alleviation Certificate (PEACe) bonds that were supposed to mature on Tuesday. The tax implementation was temporarily stopped by the Supreme Court after a petition last week by bondholders that include some of the country’s largest banks.
Moreover, the PSE plans to offer a compromise proposal relating to the BIR’s plan to impose higher tax charges on stock transactions involving listed companies that do not meet the 10-percent minimum public-float by the November 30 deadline.
The PSE earlier asserted the BIR cannot legally apply such a tax ruling, which would impose on those transactions the 5-percent to 10-percent capital-gains tax, instead of the preferential rate of one-half of 1 percent.
For her part, Internal Revenue Commissioner Kim Jacinto-Henares said the measure would help boost liquidity in the capital markets as noncompliant firms would be given more incentive to widen their ownership profiles.
Based on the rules, the PSE allows a three-year “curing period” during which firms will be charged higher listing fees but will be safe from delisting proceedings until after that period expires.
“What we are looking at is a shorter curing period,” PSE President Hans Sicat, said without giving details. Sicat said there are at least 45 listed firms that have yet to meet the free-float rule, including large companies, such as Petron Corp., Metro Pacific Tollways Corp., San Miguel Pure Foods Co. Inc., Filinvest Development Corp. and San Miguel Brewery Inc.
Only two firms have taken concrete steps to address their public- float deficiencies as a result of the PSE requirement—San Miguel Corp., which sold $970 million worth of shares and convertible bonds in April, and Keppel Philippine Marine Inc., which has begun its voluntary delisting from the bourse.
