New tax system for securities

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The Bureau of Treasury (BTR) and the Bureau of Internal Revenue have agreed to introduce a new tax system to accommodate investors buying government papers.
The new way to tax purchases of government securities will allow market players to quote two-way prices.

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The Specials Repo program is a key initiative to develop the domestic fixed income market.

“The MOA will set out the proper tax treatment for the Specials Repo, as well as provide guidance and basic parameters for its structure, operational mechanics and taxation-regulatory compliance by potential market participants in the program,” the DOF said.

Under the agreement, the bureaus will cooperate to ensure proper monitoring of Repo transactions, directed to establishing audit and surveillance trails and mechanisms to ensure tax assessments and collections in compliance with tax regulations, it stated.

The Finance department said that the program is being structured in cooperation with market regulators such as Bangko Sentral ng Pilipinas and the Securities and Exchange Commission; partner development agencies like Asian Development Bank; and other key market participants like Bankers Association of the Philippines.

The program is under the sponsorship of the BTR in partnership with the Money Market Association of the Philippines as proponent from the market side, it added.
At the same time, the agency said the Specials Repo transactions are being envisioned for the interbank/professional market participants.

The program will be governed by the Global Master Repurchase Agreement, an internationally accepted Repo master agreement developed jointly by the Securities Industry and Financial Markets Association and the International Capital Market Association.

“The ‘deliver-out, true sale basis’ feature of this instrument is expected to give potential market makers the ability to take positions in GS and provide them greater ability to manage their portfolio,” it said.

Lastly, the DOF noted that the agreement is a precursor to the eventual revenue memorandum circular that will cover the Specials Repo.

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