THE MONEY MARKET has been seeing the effects of the monetary easing of the Bangko Sentral ng Pilipinas (BSP), according to the Money Market Association of the Philippines (MART).

However, the organization is also calling for improvements in the country’s tax system to boost their industry.

In a media roundtable, MART President and Rizal Commercial Banking Corp. Senior Vice President Steven Michael T. Reyes said the money market has seen interest rates go down, which has benefitted the market.

“You’re seeing it already from the market. Rates have fallen dramatically…while the reserves is actually a very positive for the market because it releases much needed liquidity in a system where the government wants to facilitate growth,” Mr. Reyes said.

He added that the BSP’s signals to the market on its policy direction has been helpful to the industry.

“We really appreciate the current regulators for allowing us to be participative in the development,” he said.

However, Mr. Reyes said the tax system is something that should be looked into in order to beef up the country’s still “shallow” capital markets.

“Our factor is the fact that tax system is a hindrance to seeing offshore [investors] coming in and participating in our markets. For example, our withholding tax, and compared to other countries, ours is relatively high.”

When asked about the proportion of foreign investors going into the capital markets, Mr. Reyes said: “I’d be very happy if offshore is actually even close to 20% [of investors]… We’re definitely below that.”

According to Mr. Reyes, initiatives to boost cross-border investments in Asia are currently being explored.

“There is this initiative by a lot of Asian central bankers to have a borderless environment where people can invest between one country to another. It is a good concept but implementation is still a hurdle because of the taxes and policies per country,” he said.

Interest income from trust funds as well as deposit substitutes in the Philippines by a domestic entity or resident foreign firm are imposed with a final withholding tax of 20%. Meanwhile, interest income from a non-resident foreign firm is imposed with a final withholding tax of 30%. — LWTN