The statement came after stock market players were informed last Friday of the Bureau of Internal Revenue’s (BIR) position that firms below the minimum 10% public float rule could no longer be considered publicly listed for tax purposes.

“What we are saying is that we might be forced to charge them a higher tax if they will not [follow the public float requirement],� Finance Secretary Cesar V. Purisima said in an interview late last week.

An official from the Securities and Exchange Commission (SEC), who asked not to be identified, said the rules are not yet in effect.

The BIR wrote the SEC on the matter last Dec. 28. The SEC forwarded it to the Philippine Stock Exchange (PSE) on Jan. 3. The notice was given to market players only last Friday.

The BIR said it wanted to collect the capital gains tax of 5% or 10% beginning Jan. 1, pointing out that a number of PSE firms were no longer entitled to tax perks.

“Listed companies should continually maintain, if not surpass their initial public offering requirement to continually enjoy the preferential tax rate of 1/2 of 1% of gross selling price of gross value on money on disposals by stockholders of publicly listed shares through the exchange,� the BIR said.

Last November, the PSE required listed firms to maintain their public float, or the level of public ownership, at 10%, and gave those that did not meet the threshold a grace period of one year.

The SEC official said the agency would ask for a reconsideration from the BIR on the taxation rule, which will replace the existing 1/2 of 1% stock transaction tax.

The capital gains tax is defined by the BIR as the tax imposed on “gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines.�

BIR Commissioner Kim Jacinto-Henares pointed out that the capital gains tax is not a new tax and is already being applied to stock transactions outside of the bourse.

The trading of shares in listed firms are subject only to the stock transaction tax, and for those going public or selling shares to the public for the first time, the initial public offering or IPO tax.

But to keep this privilege, a company must be listed on the PSE and the transaction must be made through the bourse, Ms. Jacinto-Henares said.

“We are reminding the exchange that these shares must maintain their status as listed … otherwise, [the stock transactions] are subject to the 5%-10% rule,â€� she told BusinessWorld.

Industry officials said the new taxation rules, which could discourage investors, will not likely be implemented.

“Firstly, I think the BIR needs a law to do that because it is in the law that [the stock transaction tax will be imposed] if shares are traded in an exchange,� Joseph Y. Roxas, president of Eagle Equities, Inc., said in a phone interview yesterday.

“I do not think they can make any law that is retroactive,� Mr. Roxas added.

Tanduay Holdings, Inc., which has yet to meet the public float rule, said investors will suffer.

“Definitely existing investors are those directly affected by this rule,� Nestor C. Mendones, senior vice-president and chief financial officer of Lucio C. Tan-led Tanduay Holdings said in a phone interview yesterday.

“We will first try our best [to increase our public float] so our investors will not suffer,� Mr. Mendones said.

“[The new rule] will create a pressure on the part of an existing company. Of course we do not want the image of our stocks to drop,� Mr. Mendones said in Filipino.

Tanduay Holdings, the second-largest producer of rhum in the world and maker of brands like Cossack Vodka, Tanduay Rhum and Jamaica Lime Juice, has a 2.9% public float.

Alphaland Corp., which has a market capitalization of P86.37 billion and a 0.5% public float, said it would comply with any rule set by the BIR.

“Of course whatever is required of us, we will comply,� Mario A. Oreta, president of the Roberto V. Ongpin-led property developer, said in a phone interview.

The PSE, the country’s only stock exchange, has 253 listed firms and 133 active trading participants. Forty companies have yet to comply with the 10% public float rule.

Mr. Roxas said: “The BIR will get nothing out of that because in the first place, the shares are not heavily traded. They cannot get money because these shares are hardly traded.â€� — Neil Jerome C. Morales