By: Atty. Euney Marie J. Mata-Perez on February o6,2025

In our article published on January 9, 2025, we mentioned that we were hopeful for the passage of certain tax bills which are supposed to help boost our capital market, particularly (a) the PIFITA or the Passive Income and Financial Intermediary Taxation Act Bill (Senate Bill No. 1848), and (b) Senate Bill No. 2865, or the “Capital Markets Efficiency Promotion Act” (the “CMEPA Bill”).

We are pleased to know that the Senate approved the CMEPA Bill by third reading on January 27, 2025. The CMEPA Bill seeks to reduce the stock transaction tax from 0.6% to 0.1%, to make us at par with other ASEAN countries, such as Malaysia, Singapore, and Thailand.   It also seeks to lower the documentary stamp tax on the original issue of shares of stocks to 0.75% from the current 1% rate. According to Sen. Win Gatchalian, the passage of the bill is expected to make investment more affordable and also empower our countrymen to take control of their financial futures.

However, it was also previously announced that the Department of Finance is pushing for a supposed “Growth Bill”, which will propose that the donor’s and estate taxes, as well as the capital gains tax on transfer of real properties classified as capital assets, shall be increased from the current 6% rate to 10%.

This increase would certainly impede real property transactions, and will make real property transactions not affordable.

It should be recalled that the rates of donor’s and estate taxes were reduced by Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) which took effect in 2018. The estate taxes were reduced to help Filipinos settle their estate tax obligations and free properties for development. The donor’s tax, on the other hand, was reduced to the same rate to simplify and avoid arbitrage.

To increase such rates just a few years after they were lowered will certainly send wrong signals to investors and hurt taxpayers. It should be noted that Malaysia, Indonesia and Singapore no longer impose estate (or inheritance) taxes and donor’s taxes. For the Philippines to increase such taxes would certainly not make us at par with these ASEAN countries.

Also, real property valuation for tax purposes is already expected to increase because of the passage of the Republic Act No. 12001, the Real Property Valuation and Assessment Reform Act (RP-VAR Act) in June of 2024. Pursuant to the RP-VAR Act, all real properties will be valued or appraised based on prevailing market values in the locality where they are situated, in conformity with a so-called Philippine Valuation System (PVS).

The government is already expected to collect increased taxes with this increase in real property valuation. Thus, to further increase the tax rates of estate, donor’s and capital gains taxes on real properties will increase the burden of taxation on our citizens, especially on individual taxpayers.

The proposed increase in tax rates will also certainly put at a disadvantage individual taxpayers who are now taxed at an income tax rate of 35%, a rate much higher than the income tax rate imposed on corporations of 25%. It is also the individual taxpayers who are set to inherit properties which may have been acquired by their parents’ or ascendants’ post-taxed income.

Thus, we hope that the government will reconsider this move to increase taxes. What we would want to see instead is a government which is more honest and efficient, prudent in its expenditures and in budgeting government funds.

In the end, the government needs to secure the trust of its people. It should not look at its people as just a means to raise revenues.Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel).  She is a corporate, M&A and tax lawyer and has been ranked as one of the top 100 lawyers of the Philippines by Asia Business Law Journal and is the Chair of the Tax Committee of the Management Association of the Philippines. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant.  If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com

https://www.manilatimes.net/2025/02/06/business/top-business/no-to-increase-in-taxes/2050578