The Department of Finance on Thursday denied imposing new taxes on bank interest income, saying the newly passed Capital Markets Efficiency Promotions Act (CMEPA) is designed to level the playing field for small and middle-class savers.
In a strongly worded statement posted on Facebook, the DOF explained that the 20 percent final tax on interest earned from long-term bank deposits has long been in place under the National Internal Revenue Code of 1997.
The law, signed by President Ferdinand Marcos Jr., aims to remove preferential tax treatment once enjoyed almost exclusively by the wealthy. DOF officials said that standardizing tax rates is a long-overdue correction to a system that created an uneven advantage for high-net-worth individuals.
They emphasized that CMEPA is not a new tax law, but rather a measure that ensures equal taxation regardless of the maturity period of bank deposits.
Most bank deposits already taxed at 20 percent
According to the Department of Finance, data from the Bangko Sentral ng Pilipinas (BSP) reveal that 99.6 percent of total bank deposits were already subject to the 20 percent final tax rate. Only 0.4 percent, held in long-term accounts, benefited from lower or zero taxes.
The agency said the new law simply closes a tax loophole that catered to a small fraction of depositors—typically those with sizable savings or investment portfolios.
The previous tax setup allowed interest from deposits with maturity periods of more than three years to be taxed at lower rates ranging from 7.5 percent to 10 percent, or sometimes exempt entirely. DOF officials said this system effectively gave tax breaks to the rich while average Filipinos paid full rates.
The DOF’s message was clear: the old system was tilted in favor of the wealthy, and CMEPA restores fairness by eliminating those special treatments.
No retroactive effect on savings
The Department of Finance also clarified that CMEPA will not apply retroactively. This means interest income from deposits made before the law’s enactment will not face higher taxes. Only interest earned from new deposits moving forward will be affected.
This clarification addresses widespread concern that depositors could see their existing interest earnings taxed at higher rates, a rumor that the DOF firmly shut down.
The law’s targeted implementation timeline was crafted in consultation with lawmakers, financial institutions, and tax authorities to ensure no undue burden is placed on existing depositors.
Stock market gets major tax cut under CMEPA
In addition to changes in deposit taxation, CMEPA slashes the stock transaction tax from 0.6 percent to 0.1 percent, a move that the DOF says will boost investor participation and improve market liquidity.
The Finance Department believes the adjustment will support middle-class Filipinos seeking to diversify their investments. Young professionals and long-term savers, they said, are among those likely to benefit most from lower transaction costs in the stock market.
President Marcos also highlighted the law’s provision removing the documentary stamp tax (DST) on mutual fund shares and unit investment trust fund (UITF) participation. These financial instruments are increasingly popular among younger investors and are seen as vital tools in long-term financial planning.
The removal of DST, he said, makes these investment vehicles more accessible and attractive to Filipinos who previously shied away from them due to excessive fees.
President Marcos backs tax fairness goals
President Ferdinand Marcos Jr. called the passage of CMEPA a step toward a more inclusive and transparent financial system. He said the law ensures that both the rich and the middle class are taxed fairly and consistently.
By aligning all interest income under the same tax rate, he said the government is making sure the country’s financial regulations are no longer skewed toward those with the means to exploit legal loopholes.
In his earlier economic briefings, the President had emphasized the need for reforms that promote both market growth and equity, particularly during economic recovery periods.
Banks to adjust but unlikely to push back
While the law has sparked discussions among depositors and investors, Philippine banks are expected to comply with minimal disruption. Industry analysts said the changes align with global tax standards and won’t significantly affect deposit pricing models.
The Bankers Association of the Philippines has not issued a statement yet, but individual thrift and commercial banks have already begun informing clients of the standardized tax rates.
Most banks will also need to revise their marketing strategies for long-term deposit products, which once capitalized on lower tax rates to attract high-net-worth individuals.
Industry observers said some banks might shift toward offering better rates or perks unrelated to tax treatment in order to remain competitive.
Lawmakers praise end to tax favoritism
Several senators and House representatives who backed CMEPA took to social media to applaud the passage of the law.
Senator Sherwin Gatchalian shared on X that CMEPA is proof that policy reform can be both pro-growth and pro-poor. He noted the removal of DST on mutual funds was especially beneficial to middle-income earners.
Rep. Stella Quimbo said in an interview that the law corrects decades of unfairness in tax treatment and strengthens investor confidence in government fiscal policy.
For many in Congress, the passage of CMEPA is also seen as a test case for broader tax reforms that balance efficiency with equity.
Next moves from the DOF and BIR
The Department of Finance said it will issue more detailed guidelines in coordination with the Bureau of Internal Revenue (BIR) to ensure smooth implementation of CMEPA.
Taxpayers, banks, and investment firms are expected to receive formal notices regarding compliance procedures over the next few weeks.
The DOF said it will also roll out public awareness campaigns to educate savers and investors on the full impact of the law.
But even before those guidelines are published, the political message from the DOF is already clear: the era of tax favoritism for the wealthy is coming to a close.
And as new investors and small savers begin to reassess their financial plans, one question now hangs in the air—who really stands to gain in this new tax era?
Jaja has a degree in journalism and took classes in international law and business communication. Her career spans roles at prominent international media outlets, including International Business Times, Celebeat and Delightful Philippines. As a news editor, Jaja covered a wide range of beats, including legal, business, economy, cryptocurrency, personal finance, gaming, technology, and entertainment.