The Cabinet approved Thursday a Finance Ministry-proposed plan to impose a capital gains tax on stock investments that is aimed at addressing unfairness in the existing tax system. The ministry deserves our applause for accomplishing the task within such a short period of time.
According to the plan, individuals who make more than NT$3 million in annual net gains from stock, futures and options transactions will face a 20 percent levy. Local institutional investors will face a 12 percent tax on net gains in excess of NT$500,000 a year, with foreign institutional investors exempted from the tax.
In addition, half of the income from transactions of stocks that have been held for three years will be exempted from the tax, while trading losses can be carried forward for up to three years. For those required to pay the capital gain tax, the stock transaction tax already paid will be deducted from their income.
The plan may not be perfect, but it nevertheless is feasible because of its minimal disruption to the stock market. Taiwan's stock index soared over 100 points the day after the plan was unveiled, which demonstrates the plan's acceptability among investors.
At a time when the public is eager for the government to fix the tax system and narrow the income gap, most legislators are unlikely to openly oppose the tax. We hope the lawmakers will pass the bill soon to allow the country to move one step forward toward tax rationalization. (Editorial abstract -- April 21, 2012)
(By Y.F. Low)