The Ministry of Finance yesterday stood by its plan to impose capital gains taxes on large-scale stock traders next year, saying the levy would have no effect on the ordinary trading of shares, which should bounce back once external uncertainty subsides.
Minister of Finance Chang Sheng-ford (張盛和) reaffirmed his stance on the issue after the Taiwan Securities Association (TSA, 證券公會) appealed to the government last week to give up the proposed tax or else active traders would move funds elsewhere.
Critics said the appeal was tantamount to political blackmail ahead of the elections next month, while supporters said the proposed tax is contributing to a sluggish turnover.
The TAIEX ended down 0.2 percent at 8,627.78 on a relatively small volume of NT$65.8 billion (US$2.17 billion), Taiwan Stock Exchange (TWSE) data showed.
The thin trading came as foreign institutional players increased their portfolios of local shares by a net NT$6.09 billion, while proprietary traders and mutual funds trimmed by NT$1.1 billion and NT$252.47 million respectively, according to TWSE statistics.
The government is to impose capital gains taxes on traders who sell over NT$1 billion of stock in a year, starting in January, which might drive active players to stay on the sidelines, analysts said.
Chang shrugged off alleged unease as a “white coat syndrome” that would disappear once the dust settled.
The local bourse might regain vigor after foreign funds shift focus to emerging markets including Taiwan, Chang said, adding that funds had flowed to the US aiming to cash in on expectations of a hike in interest rates. Chang advised against reckless legal revisions to raise the taxable threshold to NT$3 billion as some lawmakers suggest, saying it is better to reevaluate the levy next year.
About 1,200 individual investors would be subjected to the capital gains taxes and some are fleeing the market as the levy draws nearer, Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) said.
The commission plans to encourage investors to stay as domestically listed companies pay relatively high stock dividends compared with their overseas peers, Tseng said.
The brokers association warned that stock turnover could shrink by another 20 to 30 percent next year due to vindictive moves on the part of active traders if the government refuses to ditch the capital gains tax.
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