Thu, Apr 26, 2012 - Page 12 News List

MOF, FSC still at odds over capital gains levy

By Shih Hsiu-chuan and Crystal Hsu  /  Staff reporters

The last-minute removal of the Ministry of Finance’s (MOF) capital gains tax proposal from the agenda of today’s Cabinet meeting seems to signify that the ministry is still at odds with the Financial Supervisory Commission (FSC) over the plan.

At the request of Premier Sean Chen (陳冲), Minister Without Portfolio Kuan Chung-ming (管中閔) convened a meeting of the ministry and the commission to narrow their differences on the proposal, which has caused an outcry among securities dealers and business leaders.

Cabinet officials declined to comment on any progress made at the meeting.

Minister of Finance Christina Liu (劉憶如) also refused to accept any interview requests in person or by telephone after she returned from the intraministerial meeting.

“She will not answer any questions until Premier Chen makes a final decision on the proposal,” one of Liu’s secretaries told reporters on her behalf.

The ministry’s tax proposal had been approved at a meeting presided by Kuan on Thursday last week and was expected to be approved at today’s Cabinet meeting.

However, Chen on Tuesday demanded that Kuan hold a meeting again to reconsider the proposal because the commission has insisted that the government lower the existing 0.3 percent securities transaction tax if a capital gains tax is implemented, and that the government imposes either a tax on income earned from securities or a tax on income earned from futures, rather than on both.

Legislative Speaker Wang Jin-pyng (王金平) and several lawmakers also raised concerns over the proposal after some Chinese Nationalist Party (KMT) lawmakers said they had received many complaints about the plan.

Meanwhile, Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said that since Taiwan has not yet emerged from an economic slowdown, unfavorable government policies may drag the pace of recovery.

“It is wiser to avoid repairing homes on rainy days,” Liang said, referring to the plan to tax capital gains on securities, as well as the price hikes on electricity and petroleum-based products.

The nation’s export-reliant economy remains in correction mode based on the latest statistics, which showed that manufacturing output contracted 3.77 percent last month from a year earlier.

That suggests an extended period of a down cycle during which time governments normally take steps to stimulate growth and avoid measures that may dampen market sentiment or consumer spending, Liang said.

The planned capital gains tax is sidelining investors as evidenced by lighter trade volume in recent days, while the increases in electricity rates next month are bound to raise production costs and affect exporters’ competitiveness, he said.

The developments are feeding inflation expectations, driving consumers to shun spending as their wages stagnate, he added.

Liang said he shared the sentiment on the need for reform, but added it should be carried out with the right timing — when economic conditions at home and abroad show sturdy stability and growth.

Additional reporting by Amy Su

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