The Ministry of Finance is studying plans to cut taxes on personal income and stock dividends, among other changes, in an attempt to help boost the economy and invigorate the local bourse.
Minister of Finance Sheu Yu-jer (許虞哲) said the ministry has commissioned a think tank to study the issue and could draw up a bill in April or May next year as part of an ongoing effort to make the nation’s taxation system more reasonable and fair.
“The ministry will conduct a thorough review and make changes on condition the tax revenue meets the annual target,” Sheu told a news conference in Taipei.
Despite the nation’s sluggish economy, tax revenue beat the government’s target by 6.6 percent, or NT$105.4 billion (US$3.34 billion) in the first nine months of this year, on top of a surplus of more than NT$200 billion last year, indicating some room for tax cuts.
Potential policy changes include an increase on tax deductions for personal income and a lower levy on stock dividends, Sheu said, adding that nothing has yet been finalized.
The former proposal could benefit 5 million taxpayers if it is realized, the ministry said.
The standard personal income tax deduction is NT$90,000 per year for individuals and that could be raised to NT$128,000 a year, the ministry said.
Brokerage firms have long blamed light trading volume on the local bourse on an unfair tax on dividends for domestic investors, which has led to an exodus of active traders, analysts said.
Foreign institutional investors are subject to a flat 20 percent tax on stock and cash dividends, while the tax rates for domestic investors range from 5 percent to 45 percent depending on their income level.
Daily securities transactions on the Taiwan Stock Exchange and the Taipei Exchange averaged NT$103.5 billion in the first nine months, down from NT$116.1 billion recorded in the same period last year, Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗) said.
Tseng, a former Financial Supervisory Commission chairman, said the heavy tax burden is turning domestic investors away.
Turnover dwindled to NT$59.44 billion yesterday on the Taiwan Stock Exchange, although the TAIEX closed on 9,362 points, a level that used to see daily volumes of more than NT$120 billion.
Sheu said the ministry has proposed suspending the tax on capital gains for another 10 years and has agreed to extend the benefit to exchange-traded funds.
The ministry would make more changes, if such moves were desirable, he said.
Only Taiwanese with an annual income of more than NT$10 million pay a higher tax on dividends than foreign investors, with the effective tax rate averaging 19.18 percent, he said.
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