Premier Sean Chen yesterday threw his support behind the financial regulator’s latest attempt to boost stock market trading volumes by proposing to cut the stock transaction tax for brokerages when they trade warrants for hedging purposes.
A task force formed by the Financial Supervisory Commission and the Ministry of Finance last month is scheduled to review the taxation of financial services next week and it may make a conclusion on the proposal.
“I am optimistic about the outcome of the proposal. The two government agencies are willing to consider [implementing it],” Chen told reporters before attending a question-and-answer session at the legislature in Taipei yesterday.
Earlier on Thursday, Minister of Finance Chang Sheng-ford (張盛和) said the ministry would evaluate the feasibility of the commission’s initiative on warrant trading in order to increase market liquidity, but Chang emphasized the bottom line is that overall national tax revenue should not decrease following the tax cut.
Based on the commission’s proposal, if the tax rate is cut to 0.1 percent from 0.3 percent, the annual volume of warrants trading is expected to grow at least twofold year-on-year.
Meanwhile, turnover of positions in warrants in the spot market may also be boosted 250 percent following the tax cut, further helping expand turnover on the nation’s securities markets, the commission said in a report.
Turnover of warrants totaled NT$343.4 billion (US$11.72 billion) last year, accounting for about 1 percent of overall trading volume on the nation’s securities market, while trading volume of hedge positions was NT$459.3 billion, accounting for 1.7 percent of the overall turnover, Taiwan Stock Exchange data showed.
The commission expects the tax cut to boost turnover of the warrants to more than NT$1 trillion, with turnover of hedge positions hitting NT$1.15 trillion, both drivers for overall trading momentum, commission data showed.
In addition, Financial Supervisory Commission Chairman Chen Yuh-chang (陳裕璋) said he hoped the task force could also debate and propose changes to other financial services taxation issues by the end of this year, including revising downward the futures transaction tax.