With the Cabinet deciding today to lower the securities transactions tax, academics were doubtful yesterday that the measure represented a sound and lasting remedy to boost the stock market.
Minister of Finance Lee Sush-der (李述德) told reporters on Monday that the government was considering slashing the levy after the TAIEX shed 783.83 points, or 11 percent, last week.
The business community and some lawmakers have suggested the tax be lowered from the current 0.3 percent to 0.15 percent to reverse the bearish sentiment among investors.
Liang Kuo-yuan (梁國源), president of Polaris Research Institute (寶華綜合經濟研究院), said he had reservations about the cut, adding that while it could boost the index in the short term, the rally could not last if the economic climate at home and abroad remained drab.
“The tax cut, if it is realized, can definitely stimulate the local bourse,” Liang said by telephone.
“But the magnitude and duration [of the rally] would be limited, as the tax has little bearing on the risks involved in equity investment,” Liang said.
Liang said the stock showing had more to do with domestic and foreign economic indicators and that the government should rather focus its energies on improving the overall investment environment.
Yang Chia-yen (楊家彥), a researcher at the Taiwan Institute of Economic Research (台灣經濟研究院), also frowned on the tax cut, but for different reasons.
Yang said he considered it inappropriate for the government to intervene in the stock market unless doing so was necessary to avert a crash.
Yang attributed the market’s recent roller-coaster performance chiefly to international factors over which the tax cut would have little influence.
“The government should think twice about the wisdom of the planned tax cut,” Yang said in a telephone interview.
“It could buoy share prices for a few days and ease burdens for heavy stock traders, [but] at the cost of hurting state coffers,” Yang said.
The securities transactions tax contributed NT$128.8 billion (US$4.05 billion) to the nation’s NT$1.73 trillion in tax revenues last year, Ministry of Finance statistics showed.
Yang said he wondered how the government could manage to remain financially healthy with less tax income, while seeking to spend more to spur domestic demand.
The Cabinet is scheduled to announce more stimulus measures today after pushing a NT$130 billion package through the legislature in July to foster economic growth.
Day Jaw-yang (戴肇洋), a research director at the Taiwan Research Institute (台綜院), said he opposed the tax cut as it would be irrelevant in saving the stock market in the long run.
Day said investors were suffering from a crisis in confidence and that the tax cut was no remedy.
Some financial officials have recommended a flexible tax policy, which would allow the ministry to adjust the levy as it sees fits depending on the market showing.
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