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Bankers concerned about impact of proposed capital gains tax

2012/04/13 20:54:41

Taipei, April 13 (CNA) Bank operators expressed concern Friday over the government's planned move to tax gains from stock and futurestrading, after the Cabinet unveiled its blueprint the previous day to levy such a tax.

The proposed tax on gains generated from stock and futures transactions is expected to increase the operational pressure facing financial holding and insurance companies, said Ting Wei-hao, general manager of Sunny Bank.

"Big financial holding companies, especially those with insurance subsidiaries, will face a bigger impact than the smaller banks,” he said.

In the Ministry of Finance's proposal, individual investors will be faced with a tax of 20 percent per household on annual capital gains from stock and futures transactions that amount to over NT$3 million (US$101,591).

The scope of the proposed tax covers stocks issued by publicly listed, over-the-counter, emerging stock and unlisted companies, as well as beneficiary certificates issued by private equity funds.

For institutional investors, capital gains from stock and futures transactions will continue to be subject to the existing minimum taxation system, under which annual gains of NT$2 million (US$67,800) or less are exempt from a 10 percent tax.

The system, however, will be adjusted from 2013 under the new proposal, which calls for the tax-free amount be reduced to NT$500,000 and the tax rate to be raised to 12 percent.

To encourage investors to hold on to their stocks for longer periods of time, institutional investors who keep stocks for more than five years will be entitled to preferential treatment under which half of their annual gains from share trading will be exempt from the capital gains tax.

Bankers Association executives said that before the finance authorities put forward the capital gains tax proposal the previous day, the chairwoman of the association, Susan Chang, briefed the government on the opinions of the member banks on the planned policy.

Given that the proposal cannot be carried out without the consent of the Legislature, the association members expect that there will be heated debate before the legislative procedure is finalized, they said.

One state-controlled bank executive, who spoke on condition of anonymity, said that he basically supports the tax proposal.

However, he expressed hope that the authorities will take relevant problems into consideration, such as whether or not the existing stock transaction tax should be cut, whether or not the tax-free amount should be increased, or whether or not the tax rate should be adjusted downward.

(By Kao Chao-fen and Elizabeth Hsu)