Joselito Malig

Article (news)

Raine Musñgi

ABS-CBN News

<p>MANILA — Finance and tax experts are calling for calm amid heated backlash over the Capital Markets Efficiency Promotion Act (CMEPA), saying the law merely standardizes taxation rules and eliminates loopholes that favored wealthier investors, not impose new levies. </p><p>CMEPA, formally Republic Act No. 11976, took effect July 1, 2025, and retains the 20% final withholding tax on interest income, which has long applied to most bank deposits. What changed is the removal of the tax exemption previously granted to time deposits held for over five years. </p><p>“That was optics, politics. It&#x27;s like there was no tax before, but there was,” said Atty. Benedicta Du-Baladad, Founding CEO of Du-Baladad and Associates, tells ANC’s Market Edge. “You just didn’t feel it because the interest was paid net of tax.”</p><div><a href="https://www.abs-cbn.com/news/business/2025/7/17/dof-clarifies-no-new-taxes-on-bank-interest-1753">DOF clarifies: No new taxes on bank interest</a></div><p>Prior to CMEPA, interest income from time deposits held for over 5 years was tax-exempt under Section 24(B)(1) of the National Internal Revenue Code. That exemption was lifted by CMEPA. Du-Baladad argued the exemption favored the upper-income classes, who had the liquidity and discipline to lock away money for half a decade or more. </p><p>“Who are those investing in long-term instruments? It’s really the higher market,” she noted. “The C, D, E segments don’t have extra funds to hold for five years.” </p><p>The Department of Finance reinforced this, stating that the 20% tax already applies to over 99.6% of deposits, and that CMEPA simply removes tax-induced investment distortions that encouraged financial engineering rather than productive capital use. Borrowing costs may tick up, but lenders say It’s manageable.</p><p>Some concern has emerged over CMEPA’s indirect effects on the cost of borrowing, as banks and non-bank lenders recalibrate to account for uniform taxation across interest-bearing instruments. </p><p>Robert Jordan Jr., Group CEO of Asialink Group of Companies, estimated that CMEPA could lead to higher borrowing costs of 30 to 50 basis points, particularly for lenders dependent on fixed-income instruments as a funding source. </p><p>“But we think the BSP will cut rates by about 50 basis points in the coming months, so it would even out,” [TC 15:20:31] Jordan said. “We can absorb it. We don’t have to raise interest rates to our customers.”</p><p>His forecast tracks with recent BSP forward guidance, which suggests rate cuts in H2 2025 if inflation continues to ease. Jordan added that while larger lenders may absorb the impact, smaller institutions or borrowers further down the supply chain could face higher rates as costs ripple through the system.</p><div><a href="https://www.abs-cbn.com/news/business/2025/7/1/marcos-jr-rings-pse-bell-signals-implementation-of-new-law-easing-investments-in-ph-stock-market-1221">Marcos rings PSE bell, signals implementation of new law easing investments in PH stock market</a></div><div><strong></strong><strong>For Capital Markets, &#x27;It’s a Clear Win&#x27; </strong></div><p>While most attention has centered on deposits, CMEPA also introduces major tax breaks for capital market participants. These include reductions in trading friction and new incentives for pooled investing. </p><p>“The other benefit that people are not highlighting is on the equities side—sales tax has been reduced from 60 basis points to just 10 basis points,” said Mike Enriquez, President of Sun Life Investment Management. “That’s huge for those who trade the market.” </p><p>He also emphasized the game-changing effect on pooled investment products: “Mutual funds and UITFs—now they’re no longer subject to documentary stamp tax. That reduces barriers for ordinary investors.” </p><p>This DST exemption and cut in stock transaction tax (STT) from 0.6% to 0.1% are designed to deepen the local capital market, making it more attractive and accessible to retail investors. Ultimately, while CMEPA sparked confusion and criticism over taxes, experts say the reforms are about fairness and efficiency, removing outdated privileges while lowering barriers to capital markets for the wider public. </p><div><em>Catch the </em><a href="https://www.youtube.com/watch?v=OJ63vJ4sGFE"><em>full interview</em></a><em> with Atty. Benedicta Du-Baladad, Robert Jordan Jr., and Mike Enriquez on Market Edge, exclusively on the ABS-CBN News Channel.</em></div><div><br/></div><div><strong>Related video:</strong></div><div><strong><span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/OJ63vJ4sGFE?&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe></span></strong><em></em><br/></div>

<p>Finance and tax experts are calling for calm amid heated backlash over the Capital Markets Efficiency Promotion Act (CMEPA), saying the law merely standardizes taxation rules and eliminates loopholes that favored wealthier investors, not impose new levies.</p>

Finance and tax experts are calling for calm amid heated backlash over the Capital Markets Efficiency Promotion Act (CMEPA), saying the law merely standardizes taxation rules and eliminates loopholes that favored wealthier investors, not impose new levies.

CMEPA sparks uproar, but experts say ‘It’s just fair play’

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CMEPA sparks uproar, but experts say ‘It’s just fair play’

Raine Musñgi,

ABS-CBN News

Published Jul 17, 2025 10:40 PM PHT

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Updated Jul 17, 2025 11:00 PM PHT

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