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Talk of the Day -- Tycoons rap government over capital gains tax bill

2012/06/02 19:17:54

Taiwan's top business leaders have rapped the Ma Ying-jeou administration for its repeated changes to its capital gains tax plan, with some of them worrying that if the "tax mess" continued, Taiwan would sooner or later tear itself down.

Below are excerpts of reports on this issue by major newspapers in Taiwan: China Times:

Far Eastern Group Chairman Douglas Hsu said he was amused by the proliferation of versions of the tax bill aimed at taxing capital gains on securities. At present, profits from securities transactions made by individual investors are not taxed in Taiwan.

"Inside the ruling Kuomintang alone, there are five or six versions," Hsu said, noting that the ruling and opposition parties as well as the private sector all have different capital gains tax plans.

"Frankly, with so many versions coming up each day, I still do not quite understand what each version means even though I have spent a lot of time studying them," said Hsu.

"Every day, what we're doing is: I hit you with a fist and you hit me with a fist. If we keep doing this, Taiwan will tear itself into pieces," he warned.

Hsu also said that the government and Legislature have been embroiled in a tug of war over the proposed bill. "It is not a good thing to turn it into a class struggle."

He urged every one to "calm down and think about one key issue: how should Taiwan re-engineer itself?"

"From the perspective of national interest, we should ponder what kind of a new model we are creating," he said.

He was commenting on the government's "final" proposal for introducing the capital gains tax, after "combining and integrating" so many versions since March.

"If it was aimed at taxing only those 20,000 big investors who have made huge profits from the securities market, why make it so complicated that even small investors, who were supposed to be pleased by the proposal, are saying they don't like it either?" Hsu asked.

Quanta Computer Chairman Barry Lam said he had seen the government's final version of the plan.

"Since the government has finally made a decision, I would not make any further comment. Just let it do its job," Lam said.

During a recent talk at National Central University, Lam said the executive branch of the government had spent too much time trying to appease the Legislature.

The government has forgotten its role of offering assistance to the nation's business sector, unlike its South Korean counterpart which has taken a dominant role in leading the country's economic development, he said.

Hon Hai Group Chairman Terry Gou said that if the cost of levying the new tax is too high, the government must reconsider how effective the new policy will be in terms of cost and benefit.

Morris Chang, chairman of world-leading contract chip maker Taiwan Semiconductor Manufacturing Co., said he supports such a tax, but the recent controversy shows that the government was "long in courage but short in planning" in pushing the tax bill forward.

He noted that under the government proposal, his company will have to pay over NT$3 billion in additional tax next year because of the "alternative tax system" provision for corporations.

Alliance for Fair Tax Reform convener Wang Jung-chang said the latest government version, which calls for the dual-track system and transaction tax option to expire at the end of 2016, with more people included among those required to pay the tax starting in 2017, was a "sheer attempt to cheat the public."

Wang said the revised version was flawed because it still did not guarantee that wealthy people would have their capital gains taxed.

Those who earn annual incomes of NT$5 million or more may not own stocks or make money on the market, while those making big gains may not earn high annual incomes and would not be required to pay the tax, Wang said.

The revised plan will be reviewed June 4 along with other proposed versions by the Legislature's Finance Committee.

Wang also said no country in the world would use the stock index as a basis for levying capital gains taxes. He said there was no way to guarantee that all investors make money when the stock market's benchmark index reaches 8,500, he said.

"Certainly there would be some stock buyers who have lost money from the market," he said, and there will definitely be investors who make money when the index remains below 8,500.

"So, the government's attempt to fool the public is crystal clear," Wang said.

Gordon Yeh, vice chairman of the Taiwan Securities Association, expected the latest version of the plan to have some impact on the market if implemented but felt it would not necessarily be bad if it meant the government could soon bring the controversy to a conclusion.

Stock brokers have complained that the "sunset provision" in the latest plan, which will eliminate at the end of 2016 the option given to investors of paying a minimal stock transaction tax when the market index moves above 8,500 points in lieu of a capital gains tax, would scare away big players and cause market volume to plummet.

"If at the end of 2016, all capital gains will be taxed, won't that mean that doomsday has come?" one said. (June 2, 2012)

United Daily News:

Quanta Computer Chairman Barry Lam, who as a major stockholder of a big company will have to pay more tax under the new tax plan, was resigned, saying "whatever the government has decided to do, I will do accordingly."

Lam recently told an audience at National Central University that each country had its own "domestic ecology," just as each individual has his or her own fate.

"Since Taiwan's political ecology is like this, we can only accept it," he said. And as a businessmen, "I can only work harder" in such an environment, he said. (June 2, 2012)

(By S.C. Chang)