Former vice premier Paul Chiu (邱正雄) yesterday called on the Executive Yuan not to impose a tax on capital gains from security transactions lest businesses suffer.
Chiu said he had blocked the proposal when he headed the Cabinet’s ad hoc Tax Reform Committee.
Imposing capital gains taxes on stocks would throw up obstacles for businesses in utilizing their funds, Chiu said, saying that in Japan, most businesses resort more to borrowing than capital markets, which most Taiwanese businesses rely on, to raise funds.
One of the main reasons that Taiwanese businesses were able to weather the global financial crisis was that they could manipulate their surplus income, Chiu said.
“We have seen very high liability-to-asset ratios in countries that have the capital gains tax — 150 percent in the US, 180 percent in Japan and 450 percent in South Korea,” Chiu said.
“During the global financial crisis, the ratio of shadow banks in the US was 300 percent,” Chiu said.
The former vice premier said the average liability-to-asset ratio for listed companies in Taiwan was 50 percent.
Taiwan levies a minor transaction tax of 0.3 percent instead of the capital gains tax.
If this tax is introduced, “Taiwan’s businesses may not be able to stay clear of a financial crisis if another occurs,” Chiu said.
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