The TAIEX tumbled 195.41 points, or 2.67 percent, to close at 7,106.09 yesterday, making it the worst performer among Asian bourses, as revisions to the planned capital gains tax on big stock players and major shareholders revived unease, analysts said.
Turnover totaled NT$79.47 billion (US$2.66 billion) with losses across the board except in the energy sector. Automakers, semiconductors and optical product makers bore the brunt of the sell-off, Taiwan Stock Exchange data showed.
“The ‘anti-rich’ clause in the latest plan is harsh for big players and major shareholders, and would drive them to cut holdings until the uncertainty clears,” said Doris Lee (李穗佳), an analyst at Taishin Securities Investment Trust Co (台新投信).
More funds would flee the market as the bill gains headway in the legislature next week, Lee said. The legislature’s Finance Committee plans to take up the matter on Monday.
The bill would subject individuals whose annual net income, other than income earned from securities trading, exceeds NT$5 million (US$167,050), and those who hold more than a 3 percent stake in listed companies, to a capital gains tax on a par with present income tax rates of between 5 percent and 40 percent.
Chinese Nationalist Party (KMT) Legislator Alex Tsai (蔡正元) said the taxable threshold would be lowered to NT$3 million in 2017, by which time investors should have grown used to the new regime.
If written into law, the tax is expected to affect 20,000 people next year and 40,000 in its second stage, KMT lawmakers said.
Hig- income individuals account for a large portion of the transaction volume and their withdrawal would deal a serious blow to the bourse, independent stock analyst Lai Sian-jheng (賴憲政) said.
A capital gains tax of “up to 40 percent” would make Taiwan the world’s most hostile place for stock investments, Lai said, warning the levy would drive the wealthy to seek foreign citizenship. Lee Jing-tu (李金土), a celebrity individual investor, shared the concern, although individual investors will not be affected as long as the benchmark index stays below the 8,500-point mark.
“I’m no longer interested in the rationale for the tax reform,” Lee said. “No one gains if Taiwanese shares keep falling and volumes keep shrinking.”
Chinese National Federation of Industries (全國工業總會) chairman Rock Hsu (許勝雄) said he was tired of talk about the capital gains tax and urged the government to convene a national affairs conference to discuss fiscal enhancement measures.