Cross-strait capital flows analyzed

The government should study issues related to capital flow across the Taiwan Strait in preparation for Taipei's and Beijing's accession to the WTO, a group of scholars said yesterday.

The academics made the call at a seminar on the possible impact of WTO entry on the development of cross-strait financial exchanges. The seminar was co-sponsored by the KMT's National Policy Research Foundation and a financial newspaper.

Former finance minister Paul Chiu (邱正雄), now a convener of the KMT's banking and financial research panel, said cross-strait capital movement in the wake of WTO accession is an issue worthy of in-depth study.

Under current law, Chiu said, Taiwan business people face a 15 percent increase in tax payments if they remit back to Taiwan their capital gains earned in China.

"This regulation has discouraged Taiwan businessmen from remitting their earnings back to Taiwan," Chiu said.

In addition, Taiwan currently offers tax exemptions for capital gains reaped from overseas investment activities. In contrast, local people have to pay taxes on interest income from their deposits at domestic banks.

"The government should review all these provisions and make necessary reforms to ensure fairness of our taxation system," Chiu urged.

DPP Legislator Chien Hsi-kai (簡錫鍇) echoed Chiu's view, saying that Taiwan should take immediate steps to reform its overall taxation system and other relevant financial regulations in the run-up to WTO entry.

"Otherwise, more people would take their money to China for investment opportunities, particularly after Beijing is admitted to the WTO and Shanghai's A-share and B-share stock exchanges are merged," Chien said.

Norman Yin (殷乃平), a National Chengchi University professor, said Taiwan's desire to discuss with China cross-strait trade and economic issues under the WTO framework to skirt the "one China" dispute may be wishful thinking.

Yin said China has claimed that cross-strait issues are "domestic problems" and cannot be "internationalized" through discussion under the multilateral WTO mechanism.

Yin added that the opening of branches by local banks in China would involve cross-strait sovereignty issues. According to international rules, the countries where banks register have legal jurisdiction.

"If China will not abide by the international regulations, the two sides of the Taiwan Strait would have to negotiate bank branch jurisdiction issues," Yin said. "Cross-strait dialogue must be resumed. Otherwise, many bilateral issues following the WTO accession cannot be resolved."

Hsu Chen-ming (許振明), a National Taiwan University professor, said local banks should set up independent subsidiaries if they want to gain footholds in China in consideration of China's foreign exchange controls.

"By so doing, Taiwan's parent banks will be able to reduce risks if their China operations hit a snag or encounter difficulties," Hsu said.

Hsu suggested that local banks cooperate with their foreign counterparts in branching out to China to minimize possible risks, as China tends to require new banks to have a large amount of paid-in capital.