The nation’s securities and futures houses yesterday remained dissatisfied with the government’s revised plan to tax capital gains on securities and futures investments, and said they would seek recourse with lawmakers to prevent its enactment.
“We find the latest version disappointing, because it fails to ease concerns over potential fund outflows and shrinking trading volumes linked to the imposition of the capital gains tax,” Taiwan Securities Association (TSA, 證券公會) chairman Hwang Min-juh (黃敏助) said yesterday.
Turnover on the stock market remained low at NT$68.78 billion (US$2.33 billion) yesterday, with the TAIEX shedding 0.55 percent at the close, Taiwan Stock Exchange data showed.
Investors will not keep their funds in Taiwan simply because the Ministry of Finance raised the tax exemption amount to NT$4 million, from the previous NT$3 million, Hwang said, adding that securities investments in Singapore and Hong Kong are not subject to a capital gains tax.
The association insisted that the ministry lower or scrap the securities transaction levy if it taxes capital gains. It said the securities transaction tax, currently at 0.3 percent of the trading amount, is equivalent to levies ranging from 42 percent to 150 percent of capital gains for investments with varied returns.
The association urged lawmakers to reject the Cabinet’s tax proposal and maintain the “status quo,” or consult the association’s draft if the legislature intends to proceed with the tax reform.
The association’s draft calls for merging the capital gains tax into a 10 percent minimum income tax, which would apply to institutional stock investments in both listed and unlisted companies, with the exemption threshold at NT$2 million. The tax rate should be halved for share holdings of two years and longer, the draft said.
Individual investors, foreign or domestic, should be exempt from any capital gains tax until institutional players account for more than 50 percent of daily turnover, from the present 30 percent, the association said.
Likewise, futures companies said they would take their case to the legislature now that the Cabinet has sided with the Ministry of Finance.
“It is both confusing and unfair to subject institutional players to capital gains tax on futures investments, but exempt all individual participants from the planned levy,” Lu Ting-chieh (盧廷劼), secretary-general of the Chinese National Futures Association (期貨公會), said by telephone.
Futures investments, intended to hedge against losses in spot securities, transcend borders and investor identities, said Lu, who was chief secretary at the Financial Supervisory Commission in 2009-2010 when Premier Sean Chen (陳冲) served as the commission’s chairman.
The association stands by its earlier plea that the government either taxes futures transactions or capital gains, but not both, Lu said.
Several social groups also said yesterday they would not accept the Cabinet’s proposal of the securities gains tax, as this version breaks the “ability to pay” principle.
“The Cabinet’s proposal was a huge frustration for Minister of Finance Christina Liu (劉憶如),” said the convener of the Alliance for Fair Tax Reform (公平稅改聯盟), Wang Jung-chang (王榮璋).
The proposal indicated that either the Cabinet or President Ma Ying-jeou (馬英九) was not backing Liu, Wang added.