The Philippine government has enacted Republic Act No. 12214, known as the Capital Markets Efficiency Promotion Act (CMEPA), which is designed to enhance accessibility for ordinary Filipinos to invest in the country's capital markets, thereby promoting inclusive economic growth.

Finance Secretary Ralph G. Recto expressed gratitude for the legislation, emphasizing its importance in making investment opportunities clearer, more affordable, and accessible, particularly for small investors.

Projected net revenue gains from the CMEPA are estimated to exceed PHP 25 billion between 2025 and 2030. The act aligns with the government's Medium-Term Fiscal Framework (MTFF), which aims to reduce the fiscal deficit to about 3.8% of GDP by 2028. Secretary Recto noted that the funds generated will be allocated to priority projects including infrastructure, health, education, agriculture, and other public services.

Special Assistant to the President for Investment and Economic Affairs Frederick D. Go stated that the passage of CMEPA represents a commitment to developing efficient capital markets, which is expected to bolster liquidity, trading activity, and overall economic growth.

The legislation modernizes the taxation on passive income, ensuring competitive and investor-friendly conditions in comparison with regional peers.

Key components of the CMEPA include the standardization of interest income taxes at 20%, a reduction of the Stock Transaction Tax (STT) from 0.6% to 0.1%, and a decrease in the Documentary Stamp Tax (DST) on the original issuance of shares from 1% to 0.75%.

Additionally, the law exempts the original issuance, redemption, or transfer of mutual fund shares and investment trust funds from DST.

These tax adjustments are anticipated to lower transaction costs, enhance market participation, and stimulate market liquidity.

Furthermore, CMEPA introduces a uniform 0.75% DST on bonds, debentures, and certificates of stock issued internationally, reinforcing tax neutrality across financial transactions.

The act also provides clarity on the definition of “passive income” and expands the definition of “securities” to ensure consistent tax treatment across various financial instruments.

Employers making significant contributions to Personal Equity and Retirement Accounts (PERA) may qualify for an additional 50% tax deduction on contributions.

In an effort to level the competitive landscape, the CMEPA repeals tax exemptions on certain vehicles not utilized for livelihood purposes and removes tax exemptions previously granted to government-owned and controlled corporations (GOCCs), thus broadening the revenue base.

The law’s implementation included specific amendments made through the presidential line-item veto to align certain provisions with national economic goals.

Notably, the decision to retain the tax exemption for nonresident income from Foreign Currency Deposit Units supports ongoing investor confidence and external account stability.

Additionally, provisions regarding the tax liability for players in Philippine Charity Sweepstakes Office (PCSO) games were excluded to promote participation in legal gaming activities that fund public welfare programs.

The tax exemptions for the Philippine Guarantee Corporation (PHILGUARANTEE) were maintained to ensure affordable housing finance remains accessible for low-income borrowers.