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 (
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 (
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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