Hung’s proposed stock gain tax reform puts taxation back at the starting line
Kuomintang ( KMT) presidential contender Hung Hsiu-chu ( ) yesterday rolled out the latest plank of her campaign: a reform plan for taxation on stock sales.
The plan cancels a clause that exempts foreign institutional investors from being taxed on capital gains tax from trading — a step toward fair taxation, she said. It proposes that all traders are taxed 0.05 percent on any capital gains from trading in securities, plus another 0.25 percent on all stock transactions. Yiin Chii-ming ( ), president of the KMT’s National Policy Foundation ( ), said Hung’s plan would build a new framework for Taiwan that would both increase turnover and stimulate tax revenue.
Hung is proposing reform in the sense that she is pledging tax on previously untaxed capital gains, though in effect what she aims to do is break down a current tax into two parts: The tax code today imposes a 0.3-percent tax on all stock transactions.
What Hung has really proposed is a clever way to sidestep the political problem of the 15-percent capital gains tax on major market players.
After years of legislative debate, the Finance Ministry’s stock gains tax on large-scale investors finally passed third reading in 2013. Shortly thereafter, in a fit of regret provoked mainly by investor pressure, Legislature imposed a moratorium on the tax, which is now scheduled to come into force three years late in 2018.
Under that capital gains tax, traders who sell more than NT$1 billion of shares on the local market each year would have to pay either a 15 percent tax on stock gains or an extra 0.1 percent tax on transactions in excess of the NT$1 billion threshold.
According to the Finance Ministry, the tax could generate an extra NT$1.49 billion in tax revenue each year from major market players, in the spirit of fair taxation and reform.
Hung’s tax scheme was reportedly formed and pitched to her by many of those same lawmakers, who also plan to process it in the coming legislative session. If approved, it eliminates the 15-percent stock gains tax — also in the spirit of reform and fair taxation. Once in effect, taxation on stock gains will remain the same as it is today for the majority of traders on the local market.
The Democratic Progressive Party has, on the one hand, charged Hung of espousing a tax scheme first proposed by the party in 2012, and on the other accused Hung of offering “false reform.”
Both competing claims are true. For over 10 years now, both major parties have attempted to “reform” the taxation system on stock gains, so far to no real results.