Following a war of words between the Taiwan Securities Association and Minister of Finance Christina Liu (劉憶如) over her proposal to introduce a capital gains tax on securities, some people representing industrial and commercial interests held a breakfast meeting to discuss the issue.
Financial Supervisory Commission (FSC) Administrative Vice Chairperson Wu Tang-chieh (吳當傑) attended the working breakfast on behalf of FSC Chairperson Chen Yuh-chang (陳裕璋), but remained silent throughout. Chinese National Association of Industry and Commerce chairman Kenneth Lo (駱錦明) said six major industrial and commercial associations had reached an agreement that now was not a good time to impose a capital gains tax on securities for individual investors, but that such a tax on corporate entities could be considered.
Despite opposition, Liu has stood by her proposal, saying the tax would only affect the top 1 percent of securities investors. Liu has been very persistent, standing her ground against a host of opponents and she is not afraid of confronting business groups. Even though Vice President Vincent Siew (蕭萬長) and Legislative Speaker Wang Jin-pyng (王金平) have both made known their opposition to the tax, Liu is sticking to her guns.
It must be said, however, that this kind of tax cannot be implemented at the drop of a hat, since it would have a huge impact on various interest groups. Even if President Ma Ying-jeou (馬英九) supports Liu’s proposal, there are too many forces ranged against it. If Liu is unable to persuade concerned interest groups to accept her tax plan, it is likely to fail.
Liu herself could end up suffering a fate similar to that of Han Dynasty statesman Jia Yi (賈誼), who was sidelined when he made too many enemies in the imperial court.
If Ma cannot resist the pressure coming from various circles, then even if a capital gains tax is introduced, it will look a lot different to what was originally planned.
The result of a compromise will be that the capital gains tax reform originally envisaged by Liu will exist only in name, emptied of its meaningful content and no longer having any real significance or value. After all, if such a tax could so easily fleece the rich, Taiwan would have implemented it long ago.
Furthermore, business tycoons have plenty of resources at their command. They can arrange a meeting with senior government figures whenever they want, and their influence goes right to the top. How could anyone expect them to just step into line without a vigorous backlash?
Liu seems to think tax reform is as simple as asking guests round for dinner. She has overlooked the fact that her tax plan is in serious conflict with the interests of wealthy people. All it takes is for these interest groups to team up and the reform will surely falter. In her naivety, Liu has failed to notice the gathering clouds and has not done a thorough job by taking people aside one by one and persuading them to accept her plan. That kind of approach would have been wiser than putting herself on the frontline and making herself a target for all manner of attacks.
Liu misjudged the situation and is now tasting the bitter fruit of her own actions. She has failed to learn from the experience of her mother, Shirley Kuo (郭婉容), who, as finance minister 24 years ago, imposed a capital gains tax, but had to scrap it after the stock market fell for 19 sessions in a row. The unfortunate result of that has been that plans for a capital gains tax on securities have gone through ups and downs and the hoped-for tax reform has never materialized.