The nation's high-income earners have parked more than NT$1 trillion (US$31 billion) in offshore accounts to avoid a maximum of 50 percent inheritance taxes in Taiwan, depriving local securities companies of business opportunities, analysts said yesterday.
"The estimates of NT$1 trillion [in capital outflows] may be conservative," Chu Yun-peng (朱雲鵬), an economics professor at National Central University, told a seminar organized by the Taiwan Securities Association (證券商業公會).
"Some even estimate the total capital outflows at US$1 trillion, including US$400 billion in time deposits, parked at UBS [a Swiss investment bank]," Chu said, without detailing where he obtained the information.
"Imagine how much local securities houses could have made in transaction fees [if they had managed these funds]," he added.
In two years' time, overseas earnings will be taxed under the Alternative Minimum Tax scheme (
He added that the only way for the government to lure the capital back to Taiwan is to cut inheritance taxes.
George Chen (陳田文), chairman of Capital Securities Corp (群益證券), said that local securities firms are challenged both by a loss of business and a deteriorating capital market.
Citing central bank statistics, Chen said the nation's capital outflows totaled US$230.9 billion, including US$54.5 billion in offshore fund investments.
If the remaining US$176.4 billion could be brought back to Taiwan, Chen said capital markets would be greatly boosted and the scope for securities firms to manage assets would be expanded.
Chen joined other securities managers in urging the financial regulator to accelerate deregulation to prop up stagnant capital markets.
Local securities firms should be allowed to make direct share investments and branch into Chinese markets, he said.
Chen also called for restrictions on new products, including those related to foreign exchange, to be lifted to encourage innovation.
Chen said it was vital for the government to deregulate the listing of A-shares index futures to allow local securities firms to tap into new businesses.
Taiwan Securities Association chairman Hwang Min-juh (黃敏助), said it was problematic that the overseas branches of local securities firms are not allowed to manage Chinese clients' securities investments.
Hwang said such restrictions on local securities firms must be lifted to allow the sector to compete internationally.
He said the securities sector suffers from poor earning performance, with earnings per share averaging NT$0.68 in 2004, NT$0.34 in 2005, NT$1.01 last year and NT$1.67 in the first 10 months of this year.
"The government should take advantage of the recent bull market and speed up the pace of reform," Hwang concluded, adding that his association was preparing to present the government with a white paper outlining how to improve the sector's competitiveness.