The Cabinet and ruling Kuomintang legislators worked out Thursday a revised version of a plan to tax stock gains that targets big investors.
This version is a considerable improvement on the previous one and is closer to the goal of tax fairness. We hope the public and opposition parties will support it and allow the plan to clear the legislative floor later this month.
The revision is based on a proposed two-track system that would allow individual investors to choose to replace the capital gains tax with a stock transaction tax.
To ensure that big investors are taxed, the new version stipulates that people with annual net incomes of over NT$5 million (not including capital gains on securities) or who own at least a 3 percent stake in a listed or over-the-counter company cannot choose the stock transaction tax in place of a capital gains tax.
It also sets Dec. 31, 2016 as the sunset date for the two-track system.
From 2017, individuals who own at least a 1 percent stake in a listed or OTC company, who have annual net incomes of over NT$3 million (not including capital gains on securities), or who sell over NT$1 billion in shares in a single year will be required to separately report stock gains or losses on their personal income tax returns.
This new version certainly still has many drawbacks. For example, because capital gains on securities are excluded from the calculation of income, professional investors without other income will not have to pay any taxes no matter how much money they make from the stock market. On the other hand, high-income earners will be taxed with disregard to the amount of profits they obtained.
Despite the problems, we are offering our support for the revision because it has taken a step closer to the ability-to-pay principle.
Over the past decades, in light of its possible impact on the stock market, no government or official has dared to raise the issue of imposing a capital gains tax except for President Ma Ying-jeou, who hopes to uphold social fairness and narrow the widening income gap in Taiwan.
The result, which has come at the expense of a finance minister and huge political and social costs, deserves to be cherished. (Editorial abstract -- June 2, 2012)
(By Y.F. Low)