President Ma Ying-jeou (馬英九) yesterday reaffirmed that the controversial capital gains tax on stock investments will take effect on Jan. 1 as scheduled.
“Although our society remains divided over the issue and some critics have even called for a delay in launching the new tax, there is already no room for such a policy reversal,” Ma said in an interview with the Taipei-based UFO radio network.
Stressing that his administration had adopted a prudent and cautious attitude toward the capital gains tax issue from the beginning, Ma said the number of investors affected by the new tax would be limited.
“After extensive discussions among finance officials, lawmakers, academics and securities business representatives, the amended version will only have a limited impact on stock investors,” Ma said.
The government expects to collect an estimated NT$6 billion (US$206.2 million) to NT$10 billion from the tax during the first year of implementation.
The tax is one of several measures introduced by Ma’s administration in the past two years to try to narrow the widening wealth gap, which is leading to widespread public discontent.
If his administration backtracks on the launch of the capital gains tax on stock investments, its credibility would be at stake and the local bourse could go into a tailspin again, Ma said.
“Should such a worst-case scenario happen, our government would have difficulty implementing any major policy in future,” Ma said.
He said the capital gains tax would not have a strong impact on stock transactions, countering fears from naysayers that it would hurt the local stock market.
“Although share prices dropped and stock market turnover shrank at one point in the process of discussions on whether to impose the capital gains tax to boost fairness and justice in taxation, the local bourse has since regained momentum,” Ma said.
He also said the capital gains tax is just one of the many factors that could affect the stock market’s performance, saying that the local bourse is faring better than the Shanghai, New York and Hong Kong stock markets, none of which face capital gains tax controversies.
Under the new law, a “dual track, two stages” scheme will be adopted to collect a capital gains tax on securities trading.
Next year and in 2014, investors will pay a transaction tax of between 0.2 and 0.6 percent on stock trade only when the market’s benchmark weighted index rises to 8,500 points or higher.
Meanwhile, investors who sell more than 10,000 initial public offering shares or more than 100,000 shares in emerging stocks or unlisted companies will have to pay a 15 percent tax on capital gains, but they will get a 50 percent tax discount if they hold on to their shares for more than a year.
Starting in 2015, only investors who sell at least NT$1 billion worth of shares in a year will be subject to a 15 percent tax.
The controversial tax was previously implemented for just over a year in 1989 before being discontinued due to a drastic slump in the stock index amid sluggish trade as a result of a boycott by big players.