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Finance ministry, stock firms still at odds on capital gains tax

2012/04/25 22:47:14

Taipei, April 25 (CNA) The Ministry of Finance and securities firms remained at odds over a proposed capital gains tax after a meeting Wednesday, but Finance Minister Christina Liu continued to stress that only a small number of investors will be affected by the tax.

Under the proposal by the finance ministry, up to 99 percent of the approximately 9 million investors in the local stock market will not have to pay the tax, said Liu following a meeting with industry and business representatives.

The tax will only apply to about 20,000 stockholders who make NT$3 million (US$101,695) or more in net gains, she said.

Liu did not respond to a proposal to hold off on the tax until after the average national per capita income in Taiwan reaches US$30,000.

The finance ministry is proposing a 20 percent tax on annual net gains of more than NT$3 million from stock, futures and options transactions.

This is much lower rate than in other countries, Lu said. For example, investors in Taiwan who earn NT$4 million in annual net gains would only have to pay NT$200,000 in tax, she said.

It would be overreacting to say the tax would have a huge impact on the local stock market, she added.

Liu had a strong debate with Hwang Lin-juh, chairman of the Taiwan Securities Association, on the proposed tax.

Hwang suggested that the authorities carefully calculate whether the tax revenues will cover the heavy tax collection costs since stock transactions of individual investors account for 65 percent of the total turnover, according Kenneth Lo, chairman of the Chinese National Association of Industry and Commerce.

The securities association later released a statement, suggesting the ministry take into account a tax on securities and futures transactions while it is considering the capital gains tax.

The authorities should also consider that neighboring countries and regions such as Hong Kong and Singapore impose lower taxes than Taiwan, the association said. It warned of a downturn in Taiwan's capital market if funds are withdrawn from the local bourse.

Investments by individuals are the main momentum for boosting trading volume, with such transactions accounting for 46-50 percent of total turnover, the association said.

Without these investors, turnover on the local bourse will surely shrink, it added.

If the Taiwan stock market loses its advantage of high liquidity because short-term investors and speculators pull out due to higher costs, long-term investors might also withdraw from the market, which in turn would affect the industries, the association warned.

Six major industrial and commercial groups will reiterate their opposition to the tax when they meet with Liu on Friday for further discussions on the matter, Lo said.

(By Eva Feng, Tien Yu-pin, Kao Chao-fen and Kendra Lin)
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