Taipei, May 28 (CNA) The legislative caucuses of the ruling Kuomintang (KMT) and the opposition Democratic Progressive Party (DPP) proposed their own versions of a capital gains tax on Monday at the first public hearing on the tax.
The administration of President Ma Ying-jeou has proposed implementing a capital gains tax on stock investors who make money on their investments as part of efforts to narrow the wealth gap.
The KMT proposed a dual tax system on the tax, while the DPP said its version does not exempt foreign institutional investors from the tax, a move aimed at erasing incentives for companies to camouflage themselves as foreign institutional investors to avoid paying the tax.
The hearing was the first one held by the Finance Committee in an attempt to draw public opinion on the tax before formally reviewing various draft proposals on it.
KMT legislator Lai Shyh-bao said individual investors can choose to declare their capital gains through stock trading as personal income tax, or substituting the capital gains tax with a stock transaction tax to be adjusted according to stock market performance.
Lai said for example, if the Taiwan Stock Exchange (TAIEX), on average, closed above the 8,000-point mark over the past 10 years, individual investors will be given an additional tax rate of 0.02 percent to 0.05 percent on their stock transaction tax.
As for institutional investors, the KMT proposed to maintain the version proposed by the Cabinet.
According to the Cabinet's version of the new tax, the tax threshold for institutional investors was lowered from NT$2 million to NT$500,000 and the rate was raised from 10 percent to 12 percent.
Stock gains above NT$2 million made by institutional investors are currently taxed based on a minimum tax system in Taiwan, while individuals are exempt from any such taxes at present.
The KMT caucus also proposed to tax both institutional and individual investors' capital gains though trading on initial public offering (IPO).
Meanwhile, the DPP caucus proposed taxing investors on gains made through stock transactions based on "tax withheld at source" principle.
Investors will be taxed on 0.1 percent of the total value of stocks they traded as their capital gains tax, according to the DPP's version of the tax.
Individual investors' capital gains will be included in personal income tax, while institutional investors' will no longer be taxed under the minimum tax system but under the income tax category, according to the DPP.
The DPP's version also specifies that foreign institutional investors will be taxed on gains through stock transactions.
Both versions will be reviewed by the Finance Committee on June 4 along with other proposed versions.
(By Eva Feng, Sherry Tang and Ann Chen)