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