CMEPA targets the wealthy, not ordinary Filipinos

The Department of Finance (DOF) has issued an important clarification to calm fears and correct misunderstandings about the newly signed Capital Markets Efficiency Promotion Act (CMEPA). Contrary to some alarming and misleading claims, this law is not a new tax on the savings of ordinary Filipinos. Rather, it corrects a long-standing imbalance in our tax system that has benefited the very wealthy at the expense of fairness.

The core of CMEPA is tax fairness and efficiency. For years, the Philippines has imposed a 20 percent final withholding tax on interest income earned from regular bank deposits. This is the tax paid by most ordinary savers—workers, retirees, small entrepreneurs—on the interest their savings earn in banks. Meanwhile, those with access to more sophisticated financial instruments, such as bonds or other fixed-income securities, often paid a much lower tax rate—sometimes as low as 10 percent or 15 percent—on the same kind of income.

This was a clear case of preferential treatment for the rich. The wealthier the investor, the more likely they were to place their money in tax-advantaged financial products. This system penalized small savers who kept their money in time deposits or savings accounts while allowing the wealthy to grow their capital with lower tax obligations.

CMEPA fixes this unfairness by standardizing the tax rate on interest income at 15 percent for both bank depositors and capital market investors. In short, everyone—rich or poor—will now pay the same tax rate on interest income. This is not a tax increase for most people; in fact, it is a modest reduction from 20 percent to 15 percent for millions of ordinary bank depositors.

The law also brings other much-needed reforms that aim to deepen and modernize our capital markets. By streamlining and harmonizing taxes on various investment products, CMEPA will make our financial system more attractive to investors, both domestic and foreign. This, in turn, supports job creation and economic growth. A more efficient capital market allows businesses easier access to funding, helping them expand and contribute to national development.

But most importantly, CMEPA reinforces the principle of progressive taxation: those who earn more should pay a fairer share. The DOF has emphasized that the law targets “those with the ability to pay”—a reference to high-net-worth individuals who previously benefited from loopholes and arbitrage opportunities in the tax code.

The concern that the government is taxing the savings of ordinary Filipinos is misplaced. Regular savings and time deposits will now be taxed at 15 percent, not 20 percent—a net gain for most middle-income earners. The bigger burden will be borne by those with large investments who used to enjoy lower tax rates thanks to outdated rules.

As with all reforms, clear communication is vital. The DOF must exert earnest efforts to explain CMEPA’s rationale and reassure the public. The law is not about extracting more from hardworking Filipinos. It is about fairness, equity, and strengthening our economic foundations.

We urge the public to look beyond social media noise and understand the broader intent and impact of this reform. CMEPA is a step in the right direction—toward a tax system that is simpler, fairer, and more in tune with the needs of a growing and inclusive economy.