In a bid to attract Taiwanese capital abroad, the government plans to offer Taiwanese investors income, inheritance and gift tax breaks of up to four years if they set up investment accounts at home and help build the nation into a regional asset management center.
Minister without portfolio Chu Yun-peng (朱雲鵬) is to host a cross-ministerial meeting today to iron out differences over a proposed plan to help turn the country into a regional center through tax incentives.
The draft, proposed by the Financial Supervisory Commission (FSC), is targeted at investors who wired their capital overseas before July this year to encourage them to open a special investment account with local banking institutes.
Under the proposal, investors who have their wealth managed here would not be required to pay taxes on interest derived from their income and would be exempted from paying inheritance and gift taxes for between two and four years.
The exemption does not apply to capital gains, however.
The commission said it would also seek to attract private banking professionals from around the world by offering them an income tax rate of less than 20 percent.
These and other incentives are expected to expand domestic wealth management volume from NT$11.6 trillion (US$353.6 billion) now to NT$20.6 trillion in four years, the commission said in the proposal.
The Ministry of Finance has expressed reservations about the duration of the proposed tax breaks and suggested cutting it to one year.
The central bank has proposed confining the new capital to offshore banking units to prevent inflows of hot money from affecting the value of the New Taiwan dollar. It said the nation was already flooded with idle funds, with excess savings topping NT$6 trillion.
The FSC has insisted, however, that the tax exemptions should be valid for at least two years and has attempted to persuade the bank to be more liberal on capital flows.
Pundits said the planned reform was positive, but more deregulation was needed if the government was serious about turning the country into an asset management center.
Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Inc Taiwan, said there isn’t much Taiwanese investors can do with their money once they wire it back given the limited investment products and services provided by local banking institutes.
“Taiwanese wealth management institutes are no match for their foreign rivals in terms of product research and development,” Cheng said. “Service tops customers’ list of concern when they choose wealth specialists.”
Norman Yin (殷乃平), a money and banking professor at National Chengchih University, agreed, saying local banks needed to improve their financial know-how and business ethics.
“They appear to be wanting in expertise,” Yin said by telephone. “That explains why no one was spared from the financial crisis ... nor did they alert their customers to potential losses beforehand.”
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