The Legislature yesterday passed an amendment to the Securities Transaction Tax Act (證券交易稅條例) that extends the duration of a previously implemented tax cut on day trading transactions until the end of 2021.
The amendment extends a one-year cut in the transaction tax for day trading from 0.003 percent to 0.0015 percent, which was implemented in April last year, by three years and eight months, with the tax cut now scheduled to end on Dec. 31, 2021.
Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗), who previously served as chairman of the Financial Supervisory Commission (FSC), proposed the extension earlier this year.
Tseng, who in his capacity as FSC chairman, relaxed trading rules in 2014 to permit day trading, whereby traders can buy first and sell later or sell first and buy later in a single session, is a firm supporter of the practice.
Day trading has three functions: promoting investment and speculation, while avoiding risk, he said.
To further promote day trading, which accounts for 20 percent of trading in Taiwan, Tseng proposed a five-year extension to the tax cut after seeing how it has boosted trading volume in the year since it was introduced.
In a statement after the passage of the amendment, the FSC said it thanked the legislature for its support and reiterated its optimism that the tax cut would further enhance the global competitiveness of Taiwan’s stocks.
The extension would maintain the momentum of Taiwan’s stock market while encouraging more businesses to go public and trade on the exchange, the commission said.
This in turn would give the government more tax revenue, despite the lower tax rate because of the increased volume in transactions, the FSC said.
Since the implementation of the tax cut in April last year, the volume of day trading has increased from 10 percent of total trading to 20 percent, Tseng said.
This expected development is a move in the right direction, Hua Nan Securities Investment Management Co (華南投顧) chairman David Chu (儲祥生) said.
The extended tax cut would benefit Taiwan’s trading environment and boost the volume of financial trade in the country, Chu added.
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