Taiwan can exploit its strong economic base and other advantages to tap into China’s growing wealth and become a regional financial hub, but its tax regime must match rivals like Hong Kong and Singapore, Standard Chartered Bank economists said yesterday.
“The inheritance tax will be a big concern for the world’s rich to decide where to have their wealth managed,” Hong Kong-based chief economist Nicholas Kwan (關家明) and Taipei-based economist Tony Phoo (符明財) said yesterday at a media briefing.
Phoo said that whether or not the government should scrap the inheritance tax depends on how serious it is about developing Taiwan into a regional financial hub, since competitors like Singapore and Hong Kong have no such tax.
Financial hubs come in a variety of forms, Kwan said, adding that the nation could focus on two niche markets: private equity, based on the nation’s prowess in high-tech expertise, and wealth management, given its exceptional financial expertise.
He said that the nation stood a good chance of managing the world’s fastest-growing fortunes from China, because Shanghai lacks the financial expertise of Taipei and because the wealthy prefer to move their assets offshore to a trustworthy place “where people speak the same language.”
Taipei can also outperform Hong Kong and Singapore in terms of understanding Chinese culture and speaking and reading Mandarin, he said.
However, Taipei lags behind Hong Kong and Singapore in its financial competitiveness, he said.
In terms of assets under management (AUM), the local banking sector managed US$246.7 billion in assets last year, or 64 percent of its GDP, which is much lower than Hong Kong’s US$1.2 trillion, almost six times its GDP, or Singapore’s US$1.1 trillion, equal to 7.2 times its GDP, Standard Chartered said.
Phoo praised the government’s goal of doubling the nation’s AUM to NT$20.6 trillion (US$664 billion) by 2012, but warned that a favorable tax regime was the key to success.
Kwan urged Taiwan to rise to the challenge by improving English proficiency, living facilities and the transparency of the financial regulatory system.
Meanwhile, Phoo yesterday reiterated his pessimism on the nation’s economic outlook for the year.
Phoo estimated that the nation’s GDP would only grow 2 percent in the second half and 3.5 percent for the full year, saying exports growth would continue to slow down in the next two quarters.
He also said the central bank would likely raise its key interest rate by another 12.5 basis points when its board meets at the end of this month to keep the nation’s inflation in check.
“But that should be the last time for the central bank to raise interest rates before keeping the rate unchanged for a few quarters,” Phoo said, adding that he estimated that the consumer price index (CPI) could decline to 3 percent in the third quarter and to between 1.1 percent and 1.5 percent in the fourth quarter.
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