Last year the government made a big thing of introducing a capital gains tax on securities transactions, saying that it would make the system fairer. Yet, even before the tax has been introduced, transactions have fallen, meaning revenue from the securities transaction tax has decreased, making it a double whammy for the government.
The market has been calling for the capital gains tax on securities transactions to be scrapped, and for the securities transaction tax to be reduced. However, considering Ma’s track record he will not want to lose face over this. It is unlikely he will scrap the newly announced tax, and will insist on keeping the securities transaction tax at the same level.
The government has already decided to reduce the futures transaction tax, saying that the fall in revenue per transaction will be made up for by the increase in futures transactions that it should encourage. Somehow the government does not seem to register that this kind of thinking should also apply to the securities transaction tax, believing that all it can do is sit back and watch the TAIEX transaction volume shrink.
It has been calculated that the daily transaction amount for the TAIEX when former president Chen Shui-bian (陳水扁) was in power rarely fell below the NT$100 billion mark (US$3.35 billion at current exchange rates), but since Ma started pushing for capital gains on the securities transaction tax, rare has been the day that the TAIEX daily transaction amount has gone over NT$100 billion. Reducing the securities transaction tax might well be just what the doctor ordered.
Dabbling in futures is a high risk investment, and by reducing the tax on futures transactions while insisting on keeping current the securities transaction tax, the government is encouraging investors to put their money in futures and fueling speculation, which is bad for investor sentiment.
The third example is how the Ministry of Finance has promoted mergers between state-owned bodies, yet objected to that between the privately owned Taishin International Bank and Chang Hwa Bank, in which the ministry holds shares.
Mergers between state-owned bodies, the government said, promote the national interest, but suggested that the Taishin-Chang Hwa tie-up was intended as a “Trojan horse” for Taishin, and would go against the national interest.
The Ma administration views mergers between state bodies as benevolent mergers and bends over backward to promote them. However, it regards those between state and private institutions as a form of corporate plunder. As soon as it catches wind of a proposed merger of the second kind it gets hot under the collar. Nobody actually knows where the standards lie.
Financial mergers and acquisitions should be made from professional considerations, and both state-state and state-private mergers should be allowed. There will be some kind of deal possible that suits the interests of all shareholders. It is not about state shareholders, who actually hold less that 20 percent of the shares, calling the shots for the other shareholders who represent an 80 percent holding, or ignoring what private shareholders want.
There are two standards in financial mergers, due to the Ma administration’s insistence on exercising control over the operation of the financial industry, instead of being content with the power of policy creation and oversight.