Taipei, April 26 (CNA) The Cabinet approved a number of draft amendments to income tax bills Thursday, finalizing a hotly debated proposal to levy a capital gains tax on securities investors.
Under the final version, the capital gains tax will only be imposed on individual securities investors with more than NT$4 million (US$136,360) in annual net gains at a tax rate between 15-20 percent, said Minister without Portfolio Kuan Chung-ming.
The approved drafts were revisions of a previous version proposed by the Ministry of Finance, which had set the tax threshold at NT$3 million.
In addition, individual investors will be eligible for deductions from the securities transaction tax, as well as profit and loss offsets, Kuan noted. They will also enjoy a 50 percent cut in tax after holding an investment for three years, Kuan added.
One of the major changes in the amendments, which will need to pass the Legislature, is that the tax will be levied differently on institutional and individual investors, Kuan said.
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, Kuan said.
As to whether the securities transaction tax rate would be lowered as some lawmakers have proposed, Kuan said the Cabinet maintains its stance of not changing it.
Minister of Finance Christina Liu said the Cabinet-approved version already includes deductions from the transaction tax, so "why will it be lowered for people who do not pay the gains tax?"
Moreover, she said the primary goal of imposing a capital gains tax is not to increase tax revenues. The ability-to-pay principle is the most important reason behind the tax reform, Liu noted.
Some 20,000 people are likely to pay the tax when it starts being collected in 2014 and the net tax revenue gain is estimated to be over NT$10 billion, according to Liu.
Income from futures transactions does not fall within the scope of the tax as advised by the Cabinet-level Financial Supervisory Commission, Liu noted.
Despite lingering complaints about the tax proposal, Liu said establishing the system is important and she hoped the public can bring themselves to accept it although they might be dissatisfied with the policy.
The government proposed the system to target the people at the top of the social pyramid first, asking them to contribute more to tax revenues because they earn more money, Liu added.
However, the government has also tried to take into account factors such as tax revenue stability, tax collection costs and Taiwan's global competitiveness, she said.
Meanwhile, ruling Kuomintang (KMT) and main opposition Democratic Progressive Party (DPP) caucus whips said Thursday the Legislature will not be able to finish reviewing the amendment drafts by the end of this session.
Given that lawmakers within the KMT are still at odds on the tax, the Cabinet will need to communicate more with them, said KMT caucus whip Lin Hung-chih.
The DPP will submit its own version of a draft, said Pan Men-an, secretary-general of the party's caucus, while DPP whip Ker Chien-ming also said it is impossible to complete the legislative process within this session.
The minor opposition People First Party was disappointed in the draft approved by the Cabinet, said caucus whip Lee Tung-hao, who added the version had retrogressed from the Finance Ministry's previous proposal and did not seem to meet the ability-to-pay or tax equality principles.
(By Angela Tsai, Hsieh Chia-chen, Justin Su, Chen Wei-ting, Wen
Kuei-hsiang and Kendra Lin)