“If after a while, we (BIR and PSE) don’t come to an agreement, then I will follow it up with a revenue regulation [imposing taxes on listed firms that have low public floats],� BIR Commissioner Kim S. Jacinto-Henares said after the filing of a tax evasion case before the Justice department.
But the BIR chief said such an “alternative� would only be undertaken once stock market players fail to comply with a PSE directive in November that gave listed firms a grace period of one year to hike their public ownership to 10%.
“They (listed firms) were given one year, right? [PSE] already set its own deadline. So this is one alternative [should they not follow]. They (PSE) have to discuss and talk with us regarding this,� she said.
The BIR chief was pertaining to PSE Memorandum No. 2010-0505, issued last Oct. 28 but became effective only last Nov. 30, ordering over 200 listed firms to “maintain a minimum percentage� of 10% of securities held by the public.
Over 40 listed firms have less than the required public float. They were given, under the same memo, a “grace period of 12 months to comply� that will end in November.
The BIR wants stricter rules, however, and told corporate regulators last month listed corporations should “maintain if not surpass their IPOs� which could be between 10% and 33% depending on market capitalization.
Under this scheme, the required public float is reduced as the company’s capital rises to P10 billion.
The PSE has rejected the plan, prompting Finance Secretary Cesar V. Purisima, which has supervision over the BIR, to ask the latter to sit down with the bourse and draft a “win-win formula.�
Asked if the BIR is amenable to only 10% public float for all firms, Ms. Jacinto-Henares said: “Based on their own definitions, they said that these are the IPOs: 10%, 15%, 33%, etc. So why don’t they maintain it?�
“I did not set the requirements, they did,� she added.
The PSE, in a disclosure late last week, cited Section 127 (A) of the National Internal Revenue Code of 1997 in defending its position. The provision states that all shares traded on a stock exchange are subject to a tax of just “one-half of 1%.�
But the commissioner stressed that it is within BIR’s “exclusive authority� to define what is a listed firm and when is a stock transaction exempt from the capital gains tax.
Ms. Jacinto-Henares, however, said she would be keeping an open mind since “at the end of the day, most of us just want to do what is correct and right for the Philippines, which is to develop the capital market.�
The PSE declined to comment, saying its president and chief executive officer, Hans B. Sicat, is out of the country. — Prinz P. Magtulis