Hung’s stock gains tax plan may raise turnover by 10%: TWSE

The China Post - - TAIWAN BUSINESS -

A re­vised ver­sion of the cap­i­tal gains tax on stock gains pro­posed by Kuom­intang (KMT) pres­i­den­tial can­di­date Hung Hsiu-chu is ex­pected to boost turnover of the lo­cal eq­uity mar­ket by 10 per­cent, ac­cord­ing to an es­ti­mate by the Tai­wan Stock Ex­change (TWSE).

Hung pledged her ver­sion of the cap­i­tal gains tax on stock gains Tues­day by di­vid­ing the cur­rent 0.3 per­cent stock trans­ac­tion tax into two parts. Un­der Hung’s tax­a­tion plan, in­vestors will be re­quired to pay a 0.25 per­cent stock trans­ac­tion tax, while they can choose to pay an ad­di­tional 0.05 per­cent­age point stock trans­ac­tion tax or pay a 15 per­cent tax on their cap­i­tal gains from trad- ing se­cu­ri­ties.

Hung has also pro­posed to re­move an ex­emp­tion for for­eign in­sti­tu­tional in­vestors from pay­ing their cap­i­tal gains tax in the lo­cal mar­ket, say­ing that the re­moval is aimed at get­ting rid of the cur­rent un­fair tax scheme in which only lo­cal in­vestors have to pay the stock cap­i­tal gains tax while their for­eign coun­ter­parts do not.

Tseng Ming-chung, chair­man of the Fi­nan­cial Su­per­vi­sory Com­mis­sion (FSC), the top fi­nan­cial reg­u­la­tor in Tai­wan, said that Hung’s ver­sion came closer to a fair tax­a­tion ap­proach in which re­tail in­vestors are en­cour­aged to buy stocks here and ma­jor mar­ket play­ers are likely to re­turn to the lo­cal mar­ket.

Un­der the ex­ist­ing cap­i­tal gains tax mea­sure, which was passed in mid-2013 with im­ple­men­ta­tion post­poned for three years to 2018, ma­jor mar­ket play­ers would have had the choice of pay­ing ei­ther an ex­tra 0.1 per­cent trans­ac­tion tax on trades be­yond the NT$1 bil­lion thresh­old or a 15 per­cent tax on their cap­i­tal gains.

In­vestors have com­plained that the loom­ing tax had turned many ma­jor play­ers away from the mar­ket, which has dragged down eq­uity trad­ing turnover. Some law­mak­ers have even claimed that they will pro­pose to abol­ish the cur­rent cap­i­tal gains tax scheme to urge ma­jor play­ers to re­turn.

Tseng said that if Hung’s ver­sion is passed, turnover of the lo­cal eq­uity mar­ket will no doubt in­crease from the cur­rent com­bined level of the lo­cal main board and the over-the­counter mar­ket, rang­ing be­tween NT$120 bil­lion and NT$130 bil­lion.

The TWSE said that turnover is ex­pected to rise at least by 10 per­cent due to Hung’s tax pro­posal. Tseng said that as long as turnover in­creases, the lo­cal eq­uity mar­ket is ex­pected to have a bet­ter chance to re­bound.

Ac­cord­ing to the FSC, since 2011, lo­cal re­tail in­vestors cut their in­vest­ments in the lo­cal bourse and the com­mis­sion data showed that lo­cal in­sti­tu­tional in­vestors poured NT$2.7 tril­lion into the stock mar­ket in 2014, down from the NT$3.3 tril­lion recorded in 2011.

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