The Financial Supervisory Commission (FSC) yesterday announced the completion of a white paper on its recommendations for furthering the development of the nation’s financial markets that is to be submitted for review by the new government.
Investors in Taiwan are subject to much higher costs and tax burdens compared with peers in neighboring nations and across the world’s advanced economies, the commission said, citing findings by outsourced research institutions.
“From the commission’s perspective, the recommended tax policies are considered the most urgent changes that will lead to tangible improvements in the nation’s capital markets,” outgoing commission chairperson Jennifer Wang (王儷玲) told a press conference.
Tax policies recommendations include the waiving of a 2 percent supplemental tax on dividend income to ease burdens on runaway costs of the second-generation National Health Insurance system, as well as a 0.48 percent tax supplemental tax to fund the nation’s long-term care program for the elderly.
The removal of the taxes will alleviate burdens hampering investors’ participation, the commission said.
However, Wang said that tax polices fall under the jurisdiction of the Ministry of Finance, and that the commission respects the governing body’s decisions under the new government.
In addition, the commission has urged for a tax system that stipulates the same obligations on dividend income for domestic and foreign investors, as domestic investors face a tax ceiling of 45 percent on dividend income, as the earnings category is grouped under the individual income tax, while the tax rate for foreign investors is capped at 25 percent as dividend income are taxed separately.
On the other side of the spectrum, foreign investors are often deterred by higher transaction taxes or about 15 percent on domestically issued bank debentures and corporate debts.
That compares with 10 percent levied on Taiwanese investors and 0 percent levied on foreign investors by regulators in Hong Kong, the commission said.
The commission also urged the new government to phase out a 5 percent business tax for the financial sector, as well as a 0.1 percent levy on fixed income funds listed on the Taiwan Stock Exchange and the Taipei Exchange to improve liquidity of the products.
For banks, the commission proposed to raise the limits on the amount of provisions that may be raised against specific risk exposures, in an effort to bolster banks’ strength and prevent escalating deterioration in times of surging volatility.
Regarding looming challenges due to the nation’s aging population, the commission proposed granting a NT$24,000 (US$735.54) deductible for individuals allocating funds toward their personal pension and long-term care products.
Yuanta Securities Co (元大證券) president Ted Ho (賀鳴珩) yesterday said that regulatory constraints and high tax burdens have stifled performance by the nation’s capital markets and crimped earnings by brokerages.
Ho said the average daily trading had tumbled from NT$168.3 billion in 2007 to NT$106.1 billion at the end of last year, while the liquidity ratio, measured in share turnover on the major bourses, tumbled from a record 178 percent set in 2009 to 78 percent as of the end of last year.
Full-service brokerages’ average return on equity also fallen from 8.39 percent in 2009 to 4.96 percent last year, he added.
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