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Brokerage firms threaten layoffs in fight against capital gains tax

2012/05/28 22:57:26

Taipei, May 28 (CNA) The Taiwan Securities Association warned Monday of a huge loss in jobs in the industry if the government imposes a tax on stock gains, which the association said would send trading volume, and the fees of its members, plummeting.

In a written report to the Legislative Yuan, the association estimated that 43 percent of employees at brokerage houses, or 21,429 people, would be laid off if average daily transaction volume on Taiwan's stock market were to fall to NT$40 billion (US$1.35 billion).

That would be far below the NT$80 billion to NT$100 billion in daily turnover needed for Taiwan's brokerage firms to break even, the association said on a day when volume on Taiwan's stock market hit NT$44.17 billion, the lowest since Jan. 19, 2009.

Daily volume is expected to decline to NT$50 billion-NT$70 billion per day if the government starts levying a capital gains tax on stock investments as it has proposed, the group added, without explaining how it arrived at the conclusion.

In its calculations, the association said that if daily turnover drops from NT$140 billion to NT$70 billion, brokerage firms' commissions will fall from NT$56 billion to NT$27 billion annually.

In that case, large-scale brokerage firms will have to fire some 15,000 employees while small-scale firms may go out of business, the association predicted.

If daily volume shrinks to NT$50 billion, 19,286 people, or 38.6 percent of all brokerage employees, will lose their jobs, the group warned.

It was unclear, however, why the group chose NT$140 billion as its baseline, because turnover averaged NT$140 billion per day in only one of 12 months in 2011 (February) and fell below NT$120 billion per day in nine of 12 months last year.

The Securities and Futures Bureau has said that according to brokerage houses, small-scale businesses will feel pressure to lay off staff when volume is lower than NT$100 billion and large firms may also have to downsize on volume of lower than NT$80 billion.

Volume fell on Taiwan's stock market after the government announced in mid-March that it would pursue a capital gains tax on stock gains.

Trading volume for all of April was NT$1.55 trillion, with a daily average of NT$75.8 billion, about 24 percent lower than the daily average in March. The daily average has fallen further to NT$71.7 billion in May.

But low volume during the period has also resulted from uncertainty over the eurozone debt crisis, which has depressed markets around the region by similar amounts, making it hard to discern the impact of the capital gains tax proposal.

(By Pan Chi-i, Eva Feng and Jamie Wang)