The Financial Supervisory Commission (FSC) yesterday said it would urge the Cabinet to maintain the futures transaction tax at 0.002 percent, even as the preferential tax rate is about to expire.
The commission said the preferential rate is important to keep strong trading momentum in the local market.
The Cabinet in April 2013 temporarily lowered the futures transaction tax to 0.002 percent from 0.004 percent in a bid to boost futures trading in Taiwan. As the preferential rate is set to expire at the end of this year, several lawmakers have asked the government to consider abolishing the Futures Transaction Tax Act (期貨交易稅條例).
FSC Chairman William Tseng (曾銘宗) yesterday said at a hearing held by the legislature’s Finance Committee that he hoped the futures transaction tax would remain.
Although the tax has raised cost concerns for investors, Tseng said that directly abolishing the transaction tax act might make the issue more complicated in the legislature.
“Maintaining the preferential tax rate, but taking out the sunset clause [which guarantees the preferential treatment will expire in certain years], would be an acceptable call,” Tseng said.
Meanwhile, the Ministry of Finance and civic groups yesterday voiced reservations about proposals to cut the futures transaction tax, saying the local market is competitive in the region and past cuts failed to boost trading volume as hoped.
Taiwan’s futures transaction tax is relatively low compared with that in Singapore and past rate cuts failed to enlarge turnover, Vice Minister of Finance Wu Tang-chieh (吳當傑) told the Finance Committee.
Wang Jung-chang (王榮璋), convener of the Alliance for Fair Tax Reform, expressed his firm objection to further tax cuts that he said would only benefit the wealthy and do nothing to narrow the income gap or advance social fairness and justice.
At yesterday's Finance Committee, Tseng also said the commission has noted the withdrawal of major market players from the local stock market in the past few years and the dwindling contribution of retail investors to the market.
Tseng said Taiwan Stock Exchange data showed that transactions by retail investors rose 10 to 15 percent last week from the previous week, but retail investors’ contribution to the market’s total turnover fell to 55 percent in the past two months, from 59 percent last year.
In addition, the contribution by major stock players remains low, which might be a key factor in determining the TAIEX’s trading momentum in the future, he said.
The commission plans to conduct a survey to better understand why major players had left the local market and transferred their investments to foreign markets.
Daily turnover on the local bourse rebounded to a level between NT$160 billion and NT$190 billion (US$5.2 billion and US$6.18 billion) last week, after market speculation over the potential for a Taipei-Shanghai stock exchange link.
Additional reporting by Crystal Hsu
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