The Ministry of Finance is considering to levy a capital-gains tax on institutional and corporate investors on their stock investments as part of the ministry's plan to impose a minimum tax on companies.
"We are not reviving taxation on yields from stock investment," Minister of Finance Lin Chuan (林全) said at a press conference yesterday.
The proposal won't apply to individuals, Lin said, adding that a final decision on including stock profits as taxable income hasn't been made yet.
"We are thinking about including the profits obtained from stock investment in the proposed minimum tax scheme," Lin said.
Some Taiwanese companies, particularly technology companies, don't pay any income taxes because of tax breaks the government offers to encourage investment. The government has been under pressure from lawmakers to impose a minimum tax on firms amid forecasts that the budget deficit will widen to a record NT$337.3 billion this year from an estimated NT$304 billion last year.
In March the minister said the government may require companies to pay a minimum 10 percent tax on profits. Yesterday Lin said the proposed measure "would affect a few hundred companies."
While the government is looking for ways to increase tariff revenues and pare its record budget deficit, Lin downplayed the potential impact on institutional investors. He said that the chance to be taxed for stock investment profits is slim if this kind of yields makes up less than half of the total income institutional investors make here.
For instance, if a securities house has an annual income of NT$2 million, including NT$1 million stock investment profits and the rest from non-stock investment income, the securities house would have to pay NT$250,000 in business tax for its non-stock-investment income according to current tax law, Lin said.
If the minimum tax rate is to be set at 10 percent in the future, the NT$250,000 tax can be converted into a tax rate of 12.5 percent, which exceeds the minimum tax rate imposed.
The securities house, therefore, need not pay tax on its stock investment profits, he explained.
The ministry is also considering whether to exclude foreign institutional investors' stock trading profits when imposing the minimum tax rate, Lin said.
"We wouldn't want to discourage foreign investors from investing in Taiwan," he said.
As most foreign institutional investors set up small offices in Taiwan, they may not be subject to the tax proposal, he added.
Moreover, Lin said that the proposal isn't a revival of the proposed capital-gains tax on stock profits, which was scrapped in 1989 after it triggered a 19-day plunge in the benchmark TAIEX.
The ministry plans to submit the minimum tax proposal to the Cabinet next month, Lin said.
RSS