MANILA, Philippines - Finance Secretary Cesar V. Purisima has ordered the Bureau of Internal Revenue (BIR) to sit down with the Philippine Stock Exchange (PSE) to come up with a “win-win formula” on the issue of the minimum public float for listed firms.
“I understand of late that there are issues where we had differences of opinion but that is normal in a democracy ... In fact, I told BIR Commissioner [Kim S. Jacinto-Henares] to sit down with the PSE so we can agree on a win-win formula to make sure that we both work towards this new future that President Aquino is trying to win our country,” Mr. Purisima said in his speech during yesterday’s launching of the PSETrade system.
Speaking to reporters after the event, the Finance chief said it would be up to Ms. Jacinto-Henares on how she would implement Finance’s position for more than 200 listed companies to maintain a minimum public float to continue enjoying tax perks.
“In a dialogue, it’s supposed to be give-and-take so we’ll see what happens when they sit down,” Mr. Purisima said when asked if he would be willing to compromise with PSE.
The department, through the BIR, has warned listed firms that they stand to lose the privilege of being tax exempt on their transactions if they will not “maintain or surpass their initial public offering (IPO).”
Under the current setup, listed companies offer between 10% and 33% to the public depending on the size of their market capitalization. The percentage of public float lessens as the company’s capital rises up to P10 billion.
The tax bureau has said it plans to charge the capital gains tax of 5% or 10% in companies that would not comply with its directive.
Currently, over 40 listed corporations have less than the lowest 10% public float requirement which is already being imposed by the PSE.
The PSE, in a disclosure late last week, however defended its tax perks, citing Section 127 (A) of the National Internal Revenue Code of 1997, which states that all shares traded on a stock exchange are subject only to a tax of “one-half of 1%.”
Ms. Jacinto-Henares, in a phone interview, declined to comment ahead of the meeting.
Meanwhile, Hans B. Sicat, PSE president and chief executive officer, welcomed the forthcomng talks between the bourse and the BIR, but said it would be difficult for the BIR to impose its rules on the bourse because of “monitoring” issues.
“In our case, you might recall we have ongoing requirement for minimum public float ... Currently there are 40 to 42 companies not following that [rule],” he said in a press briefing.
“If we follow BIR rule of maintaining the companies’ IPO, that number could double to about 70 plus [companies], which will be very difficult to monitor,” he explained.