The government’s two-year push for tax reform is crumbling, as the proposed capital gains tax on major stock investors is likely to be scrapped under pressure from the rich, who have repeatedly alleged that the proposal has damaged investors’ appetite for local companies’ shares.
Minister of Finance Chang Sheng-ford (張盛和) gave up on pushing through the draft bill unchanged and offered concessions after the Chinese Nationalist Party (KMT) suffered a major setback in the nine-in-one elections last month.
He said that there was room for a revision of the draft, but that he opposed the abolition of the levy out of consideration of the principle of fair taxation.
The drama is likely to reach its climax today, as a dozen KMT legislators — led by Lo Ming-tsai (羅明才) and supposedly backing the government’s policies — are set to submit a proposal to discard the ministry’s plan to impose a 0.1 percent capital gains tax on major stock investors.
In October, Lo urged the ministry to raise the taxable threshold from annual stock trades amounting to more than NT$1 billion (US$31.95 million) to trades tallying NT$5 billion. Chang flatly rejected Lo’s suggestion.
Lo said the nation’s coffers would reap less than NT$900 million from the proposed capital gains tax on major players, while its implementation would depress investors’ sentiment and reduce NT$50 billion in stock transaction tax revenue.
The latest proposal by Lo and his KMT colleagues favors the wealthy and would undermine the government’s efforts to revamp the tax system.
Two years ago, President Ma Ying-jeou’s (馬英九) administration launched a tax-reform program based on the concept that every dollar of income should be taxed and that tax rates should vary according to different income brackets.
The proposed capital gains tax on major stock traders is considered a crucial part of the government’s efforts in pursuing fair taxation.
It is also a compromised tax on gains from stock investments, replacing a levy on gains from stock trading that has met widespread resistance since its launch last year.
Canceling the proposed tax would mean a retrogression of the nation’s tax-reform process.
Without the proposed tax, stock investors — who are mostly in the upper income brackets — are exempt from paying taxes on their stock market gains, while ordinary Taiwanese — including most of the working middle class — are taxed on what they earn.
Beyond the issues of fairness, one of the government’s goals in pushing for the taxation of stock market gains is to shrink the widening wealth gap.
However, now that such principles are being abandoned, Taiwan will be pushed farther away from the ideal tax system envisioned by the KMT.
Does the capital gains tax play a major role in driving down the TAIEX turnover?
Is this the result of the KMT’s self-reflection following the party’s election losses?
Does the KMT really understand what the average Taiwanese wants?
The KMT lacks the political fortitude and determination to do the right thing to improve the public’s quality of life.
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