(Article published in
TODAY, Business Section)
my grandmother were alive today, I would have received the worst flogging
of my life last week. My grave fault, in fact mea
maxima culpa, was to laugh out loud during what the old folks call as
the mahal na araw, that is
generally the Holy Week, but more specifically, the Easter Triduum. And
the reason for such inappropriate hilarity was that I read the sponsorship
speech of Sen. Ralph G. Recto asking his colleagues to approve Senate Bill
No. 2518 which later on became law as Republic Act No. 9243, entitled, An
Act Rationalizing the Provisions on the Documentary Stamp Tax (DST) of the
National Internal Revenue Code of 1997, as amended, and for other
researchers, who at the time they sallied forth to scan the horizon for
the legislative history of R.A. No. 2518 were still under bar, report that
Senate Bill No. 2518 was the receptacle in that august body that received
the imputs of the House Representatives’ House Bill Nos. 2266, 4480 and
4481, respectively eliminating the doc stamps on the secondary trading of
financial instruments, exempting from the doc stamps the borrowing and
lending of securities, and expanding the coverage of the term
“certificate of deposit” that is subject to the doc stamps.
They made particular note, undoubtedly reflecting their high esteem
of the lower house, that the explanatory notes for each bill were adopted
as the sponsorship speeches; no interpellations were made nor amendments
offered at the floor, and all three were consequently unanimously approved
on second and third readings. You
really gotta give it to Speaker Joe de V for making that transit system at
the Batasan Complex run on good time.
the upper house, Senate Bill No. 2518 encountered some turbulence. My
researchers tell me that on 12 March 2003, it was brought up to the floor
on second reading. On that
day, Senator John Osmeña, after the sponsorship speech of Senator Recto,
confessed he had not read the bill at all and thought it was “a bill to
lower the revenues of government from motor vehicles.”
Consideration of the bill was promptly suspended.
Consideration was apparently resumed only on 22 October 2003 during
which Senator Serge Osmeña conducted interpellation for about thirty
minutes, primarily on the revenue impact of the proposed measure.
On 28 October 2003, during the period of amendments, Senators Serge
Osmeña and Manuel Villar proposed four amendments, three from Osmeña and
one from Villar. All were
accepted by the Senate Committee on Ways and Means but none ended up in
the law, despite the fact that the Senate version was the working draft of
the Conference Committee formed to reconcile the conflicting versions of
the bills approved in the Senate and in the House.
that as its legislative genesis, the sponsorship speech of Senator Recto
constitutes the major repository of the legislative wisdom and humor
behind R.A. No. 9243.
good senator began by apologizing for the parentage of the bill.
It came, he admitted, from that bastion of Philippine capitalism
known as Ayala Avenue. But to
its credit, he hastens to add, it does not bear the mark of AGILE which
would have, according to him, raised the hackles of his colleagues.
He then disclosed that the “bill started out as a mere revenue
measure but evolved into a wide-ranging piece of legislation designed to
strengthen the market infrastructure through which savings are accumulated
and channeled into productive uses.”
This made a clown of captains of
Ayala Avenue who were charged to lobby for the bill.
They all along thought that they was pushing for a revenue-neutral
measure primarily intended to institute reforms and not to raise money to
fund the deficit.
after reciting the woes of the Philippine capital market among which said
was distortions caused by the DST, he proceeded to single out the
amendments that would “level the playing field.”
The first field he leveled was the area of investment instruments.
He tried to achieve this by reducing
the cost of issuing original shares of stock from P2.00 to P1.00 per P200
of par value and raising the
cost of issuing original debt instruments from P0.30 to P1.50 (mercifully
lowered to P1.00) per P200 of issue price.
Thus, a businessman’s cost of increasing the money to be used in
business, whether by issuing more stocks or borrowing from the banks, will
be the same at P1.00 per P200. The
good Senator forgot that stocks last for the life of the corporation but
debts are good only to maturity. Thus,
the cost of the debt instrument to the investor who lends is higher
necessarily than the cost of the certificate of stock to the investor who
subscribes to stock. Some
level playing field, you’ve got there, Senator.
to mitigate the slope of “the level playing field”, the Senator also
proposed to prorate the DST on debt instruments with maturity of less than
a year. This, however,
militates against an avowed purpose of the bill, of developing the capital
market. Instead of
encouraging long term placements, this cute measure reinforces the
“30-days, 30-days” placement mentality of money market investors.
It looks like the good senator has forgotten the good fight in
sessions past for the Long Term Deposit or Investment Certificate.
field that was supposed to be leveled was the secondary trading of equity,
primarily stocks, and of debt instruments.
Admittedly, the former DST law was a stumbling block for secondary
trading of debt since it was imposed on issuance as well as subsequent
transfers of the paper. But merely removing the DST on secondary trading
of debt instruments did not result in neutrality.
Under the new law, non-listed stocks sold after issuance will still
be subject to some DST, albeit reduced by 50% from the former rates.
Listed stocks when sold in the Philippine Stock Exchange are exempt
from the DST only for five years from the effectivity of R.A. No. 9243.
The exemption of secondary trading on debt instruments, on the
other hand, is full and forever.
then, maybe the good Senator is right after all.
The incline in favor of equity on original issues was, to an
extent, cancelled out by the incline in favor of debt instruments on
secondary transfers. But,
then it is not “level playing field”, but “see-saw in a kiddie
explaining other portions of the bill, the good senator confesses that,
ala Joan of Arc, his bill is the because of the voices he heard, voice of
the banks, of the brokers, of the Bangko Sentral (as if that office really
cared whether they paid taxes or paid out dividends to the Government), of
the Department of Finance, of President Gloria Macapagal-Arroyo, and of,
the ever crying, Juan de la Cruz.
Juan de la Cruz has a lot to cry about.
Among many instances, Juan de la Cruz, according to the good
senator, “breaks down in tears as fire rages all his cash, jewelry,
appliances, and other belongings which he had bought from his earnings as
an overseas contract worker”. The
senator’s bill was meant to assuage his pain.
The problem is that particular cry of Juan de la Cruz deals with
property or non-life insurance the DST on which his bill did not touch.
Instead, he gave concessions to the life insurance companies that
do not deal with risk of fire damage to property.
The good senator, capped missing the level playing field, by
shooting the ball, bulls eye in fact, in the other team’s basket.