Tue, Sep 11, 2001 - Page 1 News List

Business leaders propose cutting stock levy

TAX TALK A one-year suspension of the 0.3 percent securities transaction tax would help revive the market, business leaders say, but critics have their doubts

By Stephanie Low  /  STAFF REPORTER

Lin Kun-chung, left, chairman of the Chinese National Federation of Industries, and Gary Wang, center, a KMT lawmaker and chairman of the ROC General Chamber of Commerce, yesterday visit DPP caucus convener Lin Feng-hsi to lobby for a one-year suspension of the securities transaction tax. The business leaders said the suspension would stimulate Taiwan's sluggish economy.

PHOTO: LIAO RAY-SHANG, TAIPEI TIMES

Business leaders visited lawmakers from across party lines yesterday to line up support for a proposal to suspend the securities transaction tax for one year -- a measure aimed at helping the nation's sluggish economy.

But legislative caucus leaders refused to commit to the idea yesterday, saying more discussion was needed before the proposal goes forward.

Critics have said suspending the 0.3 percent tax would do little to help the economy, as the most likely effect would be just a one or two-day boost to the stock market.

Stocks are well off their highs because the outlook for the global economy is poor, they say, not because the stock transaction tax makes owning equities unattractive.

"Suspending the tax would not provide incentives for investors to invest more in the local stock market," said Spencer White, head of Merrill Lynch in Taiwan.

A proposal to suspend the tax was put forward at last month's Economic Development Advisory Conference, but foundered after there was no consensus to adopt the measure.

Another measure that also failed to win consensus support was a cut to the capital gains tax for property transactions.

But despite the lack of a consensus, the Cabinet has proposed reducing the tax for two years -- leading business leaders to think they can also win a suspension of the stock transaction tax.

"The business sector isn't against taxes," said Gary Wang (王令麟), a lawmaker with the KMT and the chairman of the ROC General Chamber of Commerce.

"But Taiwan's economy is like a heart attack patient who remains in intensive care, in urgent need of a heart stimulant."

Business leaders argue that suspending the stock transaction tax would boost the market and help Taiwan's roughly 7 million retail investors.

Lin Kun-chung (林坤鐘), chairman of the Chinese National Federation of Industries, said daily turnover on the Taiwan Stock Exchange has dwindled to almost nothing.

Turnover yesterday was a paltry NT$27 billion, compared to the NT$200 billion that was typical during the bull market early last year.

"We hope that the tax can be shelved for one year to stimulate the stock market," Lin said, saying it would give investors more confidence to put money into stocks.

Wang said that a one-year suspension of the tax would likely decrease government revenue by roughly NT$30 billion. But applying a little "supply-side" theory, the legislator said a revived stock market would mean higher revenue from business, commodity and income taxes as well as customs duties.

The government has suspended the securities transaction tax six times between 1960 and 1986 as a part of its efforts to stimulate the economy.

Taiwan's competitors -- including Singapore and South Korea -- have recently adopted tax cuts to aid their economies, Wang said.

But many lawmakers weren't sold on the idea yesterday.

Tsai Huang-liang (蔡煌瑯), chief executive of the DPP legislative caucus, said there was no evidence that past suspensions of the stock transaction tax had led to a rise in the market.

Economists are also divided on how suspending the tax could benefit the broader economy.

Tsai said yesterday the DPP caucus would discuss the proposal at its next meeting on Sept. 18.

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