The two major political parties yesterday found common ground as lawmakers passed an amendment to abolish the yet-to-be-implemented capital gains tax by an overwhelming majority.
The Chinese Nationalist Party (KMT) and the Democratic Progressive Party (DPP) caucuses submitted separate proposals to amend the Income Tax Act (所得稅法) to terminate the tax on capital gains, effective Jan. 1.
The difference in the versions lay in the explanatory section. The KMT stressed a “dynamic relationship” between the securities transaction tax and the capital gains tax, while the DPP panned President Ma Ying-jeou (馬英九) for advancing the policy. The DPP’s version was voted down.
The KMT version, which was put to a vote along with a proposal from the New Alliance — which also called for ending the capital gains tax — cleared the floor, with KMT Legislator Tseng Chu-wei (曾巨威) abstaining from the vote and People First Party Legislator Thomas Lee (李桐豪) voting against the measure.
Tseng, a former finance professor nicknamed “the cannon of tax reform,” has long been a strong supporter of the capital gains tax, and said that yesterday’s action was the “black Friday of tax reform.”
“As a finance and tax academic, I am deeply regretful and heart-stricken. We should not be afraid to make wrong decisions,” Tseng said.
“The only thing we should be afraid of is not being able to learn from mistakes to find an answer that is more reasonable and fair,” he said.
He said he still hopes the “distorted tax structure” — including the securities transaction tax — could be altered to restore the idea of fairness that “as long as there are gains, tax should be levied.”
A resumption of the capital gains tax was forced by the KMT in 2012 “with its substance totally out of line,” and still saw its end yesterday after several rounds of revisions, he said.
While capital gains will not be taxed, “the Ministry of Finance still will not reduce the current securities transaction tax,” Lee said. “Taiwan’s capital market will be seriously restricted.”
A 0.3 percent transaction tax is imposed on stock market investors.
DPP Legislator Lee Ying-yuan (李應元) said Ma had foisted the policy on the nation without proper discussions and the KMT “lacked core values,” demonstrated by its former and current presidential candidates proposing different versions of the amendment.
Lee said tax reforms should be deliberated “as a whole” if changes are to be made in the name of social fairness and justice.
The proposal to tax some capital gains from the stock market was passed by the legislature in the middle of 2013, but its implementation was later delayed to 2018 because of fears it would negatively affect turnover in the local stock market.
Opponents said the mere existence of the measure was scaring away investors.
Additional reporting by CNA
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