The legislature’s failure to pass an amendment to the capital gains tax on securities investments is likely to negatively affect the local bourse, academics said on Saturday.
The market was expecting that the revision to the Income Tax Act (所得稅法) proposed by the Chinese Nationalist Party (KMT) would be passed on Friday before the legislature went into recess, but lawmakers let investors down, said Liang Kuo-yuan (梁國源), president of the Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院), one of the nation’s leading think tanks.
On May 20, the bill passed its first reading. However, despite the KMT pushing for the bill’s passage in a bid to boost turnover on the local bourse, the legislature was unable to finish processing the proposal because opposition parties still had reservations about it.
On Friday, the TAIEX closed up 0.13 percent at 8,254.80 points after retreating from the day’s high of 8,334.44 amid anxiety over the bill.
The bill aims to scrap the 8,500-point threshold that automatically triggers the imposition of the tax on most individual investors. Instead, it proposed to give investors who trade more than NT$1 billion (US$33.4 million) in shares within one calendar year the choice of paying a 15 percent tax on their capital gains or a 0.1 percent transactions tax on trades above the first NT$1 billion in transactions made in that year.
The revision also aimed to exempt retail investors from the levy and lower the tax burden on major market players.
Liang said the revision would be a positive move for the local bourse, in particular at a time when the already-slow economic rebound is showing signs of slowing down.
The government recently cut its growth forecast for the economy this year to 2.4 percent from 3.59 percent.
Liang said the passage of the capital gains tax bill was expected to boost investor confidence, leading to more private investment, which in turn would help stimulate the economy.
Norman Yin (殷乃平), an economist at National Chengchi University, also said that the failure to pass the amendment could cast a long shadow over the local bourse.
He urged lawmakers to let tax experts decide on the issue instead of using it as political leverage.
Lawmakers plan to hold a special session between June 13 and June 27 to review the bills that were scheduled to be processed in the last session, which include the capital gains tax revision, a pension reform bill and a media anti-monopoly bill.
Executive Yuan spokeswoman Cheng Li-wun (鄭麗文) said the Cabinet would try its best to communicate with lawmakers to pass these bills during the special session.