Fri, Jun 25, 2004 - Page 10 News List

Brokerages threaten to stage tax protest

BLOOMBERG

Major brokerages plan to stop issuing share warrants next month in a tax protest, a move an industry association said may reduce stock market turnover by more than NT$5.8 billion (US$168 million) a week.

The 25 percent tax on the warrants exceeds the typical 15 percent to 20 percent profit margins brokerages earn from their issue, said Chuang Tai-ping, secretary-general of the Chinese Securities Association (券商公會).

"Many major brokerages plan to jointly stop issuing warrants to protest against the unfair tax rate," Chuang said in a phone interview.

Brokerages have refused to pay the tax and filed an administrative lawsuit against the government, saying the 25 percent tax should be levied after their hedging costs are deducted.

The association will discuss the issue at a board meeting on July 6, Chuang said.

Yuanta Core Pacific Securities Co (元大京華證券) yesterday urged officials to resolve the issue.

"We hope government agencies can help solve the tax problem, otherwise it will severely hurt our willingness to issue new financial products," Yuanta vice president Lawrence Lee (李雅彬) said in a phone interview.

Chuang and Lee estimated that if all the brokerages stop issuing warrants the government's tax income may be reduced by at least NT$3 billion a year, while stock market turnover could shrink by more than NT$300 billion a year.

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