Turnover on the TAIEX was the highest in more than five months yesterday, the first trading day after the Chinese Nationalist Party (KMT) legislative caucus reached a preliminary agreement to relax the capital gains tax on securities investments.
The benchmark TAIEX rose 0.86 percent, or 71.46 points, to 8,390.05 yesterday. It marked the highest level since Aug. 4, 2011, when the index climbed to 8,469 points in the middle of the session, Taiwan Stock Exchange (TWSE) data showed.
Meanwhile, turnover swelled to NT$121.49 billion (US$4.04 billion) yesterday, up from NT$88.8 billion the previous day, its highest level since Nov. 30 last year.
“The government’s move to revise the securities capital gains tax boosted investors’ confidence in the securities market, and has helped recover trading momentum,” JPMorgan Asset Management executive director James Yeh (葉鴻儒) said in a statement.
Yeh expects the nation’s securities market to climb further in the near future, as more individual investors are expected to return to the stock market on the back of the revision of the tax policy.
The KMT legislative caucus last night reached a preliminary agreement with the Financial Supervisory Commission and the Ministry of Finance to revise the capital gains tax on securities investments that had been introduced last year.
However, Minister of Finance Chang Sheng-ford (張盛和) reiterated that the securities capital gains tax would not be the only factor to affect trading momentum on the stock market, be it in a positive or negative way.
Chang said various uncertainties remain in the nation’s securities market in the near future, such as global economic trends and the government’s plan to raise electricity rates in the second half of this year.
“But the stock market will definitely perform better this year than last year,” Chang said in a media briefing yesterday.
Chang said he expects revenue from the securities transaction tax to rebound following the recovery of trading momentum in the stock market.
Revenue from the securities transaction tax saw an annual decline of 24.4 percent to NT$20.9 billion in the first four months of the year, based on the stock exchange’s average daily turnover of NT$90.8 billion during the period, according to the ministry’s data.
As for the contribution of the securities capital gains tax, revenue from the tax is expected to be NT$6 billion to NT$10 billion per year in the first two years of imposition, with revenue reaching NT$7 billion to NT$11 billion per year after that, Chang said.
However, Chang said the ministry will hold the bottom line in maintaining the levying of capital gains tax on stock investment in non-listed firms, as well as in companies listed on Taiwan’s Emerging Stock Market (興櫃市場) or for initial public offerings.
However, the Alliance for Fair Tax Reform (公平稅改聯盟) said the government’s move to revise the securities capital gains tax signified the death of fairness and justice.
“The tax has been reduced to a skeleton only,” the alliance said in a statement yesterday.
The revised version lacks the spirit of a capital gains tax, while the levy could only be seen as a supplementary securities transaction tax, the statement said.