Evaluating BIR Revenue Regulations 16-2012 In Light of Its Impact on Nascent Domestic Capital Markets: A Public Governance Approach

Abstract

A few months after the issuance by the Philippine Stock Exchange of the Amended Minimum Public Ownership Rule, the Bureau of Internal Revenue issued Revenue Regulations 16-2012, which had for its purpose the maintenance of a 10% minimum public float by publicly listed companies. Compliance therewith has also been made a conditio sine qua non for the enjoyment of stock transaction tax on every sale, barter, exchange, and other disposition of shares through the local stock exchange. Non-compliance with the Revenue Regulations subject the affected transactions to a much expensive capital gains tax as prescribed in Sections 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), and 28(B)(5)(c) of the National Internal Revenue Code.

The impact of Revenue Regulations 16-2012 on the domestic capital market underscores the need to shift from classical organization theory to the multiple constituencies perspective that espouses a regime of closely knit cooperation and coordination on three levels: (1) agency to agency level; (2) agency to private sector regulator level; and (3) government-private sector regulator to market participant and shareholder level.