Taipei, May 28 (CNA) The Legislature's Finance Committee held a public hearing on the proposal to tax capital gains on stock transactions Monday in an attempt to solicit public opinions on the issue before holding a formal review on the various draft proposals.
The hearing came after lawmakers recently failed to reach a consensus across party lines on the tax proposal, of which there were seven proposed versions waiting for review, according to the Finance Ministry.
Attendees at the hearing included Finance Minister Christina Liu, committee members, representatives from the securities, industrial and commercial sectors, as well as academics. Members of several civic groups, however, were listed only as observers.
The observer status prompted civic group members to stage a protest outside the Legislature Monday, saying the committee is sided with business groups.
Ruling Kuomintang (KMT) Legislator Lo Ming-tsai, convener of the committee, said the committee did invite civic groups to attend the hearing, however, representatives of the groups said they could not make it.
At the hearing, Edward Chow, a finance professor at National Chengchi University, said a capital gains tax was fairer than the current stock transaction tax because the former only taxed investors when they make income through stock trading. He also proposed to lower the stock transaction tax if a capital gains tax is imposed.
Chow said investors' stock transaction tax totaled NT$114 billion (US$3.8 billion) in 2011, accounting for 10 percent of the central government's total budget that year, an indication that the percentage was too high and the government should lower the tax.
In response to Chow's suggestion, Liu said both Hong Kong and Singapore imposed stock transaction taxes on investors.
Hong Kong's tax revenues from stock transactions in 2011 accounted for 7 percent of its total tax revenues, while Taiwan's accounted for 5.91 percent, Liu said, adding that both Hong Kong and the city-state also impose capital gains taxes on investors.
Liu also said it was unfair to pin recent low trading volumes on the Taiwan Stock Exchange (TAIEX) on the tax proposal since it was normal for stock markets to be influenced by both foreign and domestic factors.
TAIEX's performance during January to April this year was similar to that of the Hong Kong and South Korea markets, and was better than Japan's market, she said, noting that Greek's possible exit from the eurozone casts shadows on growth in the global stock market.
Meanwhile, Taiwan Securities Association Chairman Hwang Min-juh reiterated the association's stance in opposing the tax, citing high tax collection costs as a reason.
In addition, KMT Legislator Ting Shou-chung said he had received an appeal from the high-tech sector that said proposals to increase institutional investors' capital gains tax rates and to lower the deductible amount would add strains to businesses that were already under stress because of recent hikes on utility and fuel prices.
Liu initiated the tax proposal after assuming office on Feb. 6 to make good on a pledge by President Ma Ying-jeou to promote tax reform and taxation fairness.
However, the proposal has drawn strong opposition from brokerage firms, which fear the tax could result in an exodus of investors from the stock market.
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.
According to the Cabinet's version of the new tax, individual securities investors who make more than NT$4 million in annual net gains would be taxed at rates between 15 and 20 percent.
For institutional investors, the tax threshold was lowered from NT$2 million to NT$500,000 and the rate was raised from 10 percent to 12 percent.
Four KMT legislators have come up with different versions of the bill, while the opposition Democratic Progressive Party and People First Party have also drafted bills, accounting for the seven versions awaiting review.
(By Eva Feng, Sherry Tang and Ann Chen)