The Ministry of Finance is expected to submit a report to the Cabinet within two weeks on whether foreign institutional investors' capital gains on stock investments should be taxed under the Alternative Minimum Tax (AMT) scheme.
The ministry's Taxation Agency is scheduled to discuss the thorny issue with new Finance Minister Ho Chih-chin (何志欽) today.
According to the AMT regulation that took effect on Jan. 1, enterprises' capital gains earned through stock investments should be included in their basic income for AMT calculation.
A 10 percent tax rate will be levied on companies' annual earnings surpassing the NT$2 million (US$61,750) tax-free threshold, as the AMT stipulates. Foreign institutional investors which do not own fixed operational venues or agents in Taiwan are excluded from the AMT.
This has triggered a strong backlash from foreign companies. They argue the new rule is tantamount to resuming the collection of a capital-gains tax on stock investments, which was scrapped in 1990.
They have even threatened to withdraw from the local market, according to reports in the Chinese-language media.
The issue again attracted attention on Tuesday when Vice Premier Tsai Ing-wen (
"Unfortunately the finance ministry is in the wrong this time," said Peter Huang (黃古彬), vice chairman of Polaris Securities Co (寶來證券) yesterday.
Foreign securities houses serve as agents for overseas clients investing in the local stock market. The capital gains earned on shares go to their clients' rather than the securities houses, such as Morgan Stanley, Huang explained.
"This is why it's unfair to levy taxes on these foreign securities companies as the profits made do not belong to them," he said.
Chien Hung-wen (簡鴻文), chairman of the Taiwan Securities Association (券商公會), offered a different view.
"The AMT should not grant preferential treatments to certain groups. As long as they have income, they should pay taxes like other people," he said.
He complained that the ministry should not have a bias as some local securities houses now have to endure a high tax rate up to 50 or 60 percent due to the unresolved differences on taxation on warrants.
Warrants are certificates that give the bearer the right to buy securities, gold or other commodities at a stated price for a stated period or at any time in the future.
The ministry yesterday kept a low key, saying that the issue will require
inter-ministerial discussions.
"No answers count until she [Vice Premier Annette Lu] nods," said a
ministry official who declined to be named.
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