Warrant tax cut proposal passes initial review

By Amy Su  /  Staff reporter, with CNA

Thu, Dec 12, 2013 - Page 13

In a bid to boost stock market trading volume, the legislature’s Finance Committee yesterday gave its initial approval to a proposal to reduce the securities transaction tax for brokerages when they trade warrants for hedging purposes.

The proposal will be referred to cross-party negotiations in the legislature, as committee members failed to reach a consensus on the duration and scale of the tax cut.

The proposal was initiated in October last year by a task force formed by the Ministry of Finance and Financial Supervisory Commission to increase market liquidity.

Based on the government’s proposal, the tax rate will be lowered to 0.1 percent from 0.3 percent now for five years, which it said could boost annual warrant trading volume by at least two-fold year-on-year.

Warrant transactions in the spot market may also increase following the tax cut, further helping expand turnover in the securities markets and raising the annual revenue from the securities transaction tax by NT$508 million (US$17.14 million), the government proposal said.

Several lawmakers suggested that the tax cut be expanded to include the stock transaction tax, with some proposing that the rate be reduced to 0.2 percent from 0.3 percent, while others recommended a floating rate of between 0.1 percent and 0.3 percent, which the ministry can adjust based on market conditions.

Minister of Finance Chang Sheng-ford (張盛和) rejected both proposals.

“The rate of the stock transaction tax is not a deciding factor in the stock market’s performance,” Chang said during a question-and-answer session.

Cutting the stock transaction tax would only hurt the nation’s tax revenue, Chang said, adding that reducing the tax rate by 0.1 points would translate into a loss of NT$28 billion per year in tax revenue.

The committee said it would hold another meeting to review the proposals.

Separately, the commission yesterday said that a print advertisement congratulating a Chinese bank on its launch of Formosa bonds “on the island” has violated the principle of parity across the Taiwan Strait.

The commission was referring to an ad published on the front page of the Monday edition of the Chinese-language United Daily News and its sister newspaper, the Economic Daily News, on China Construction Bank’s (中國建設銀行) launch of yuan-denominated bonds in Taiwan.

The full-page ad, placed by a number of Taiwanese firms, including several Taiwanese banks, congratulated the Chinese bank for its successful launch of the biggest-ever tranche of Formosa bonds “on the island,” implying that Taiwan is part of China.

The commission said the GRETAI Securities Market has issued letters to relevant local banks asking them to exercise caution and abide by government regulations when dealing with Formosa bond-related ads in the future.

GRETAI management has also sent a warning to China Construction Bank’s Taipei branch about breaching the principle of cross-strait parity and urged it to abide by relevant regulations.