The Taiwan Securities Association (TSA, 券商公會) yesterday urged the government to scrap the capital gains taxes on stock investments, saying the levy has scared off active traders and depressed turnover.
The TAIEX shed 0.97 percent to close at 8,918.7 points yesterday. Turnover was light at NT$77.92 billion (US$2.48 billion), Taiwan Stock Exchange data showed.
“Unfavorable taxes are the main reason why active traders refuse to come back and have sought investments elsewhere,” TSA chairman Chien Hung-wen (簡鴻文) told a news conference.
The growing array of investment products and channels, especially the stock exchange link between Hong Kong and Shanghai, is luring away investors, Chien said.
Despite a series of regulatory easing this year to stimulate transactions, the local capital market might become increasingly irrelevant if authorities continue to ignore the trend, he said.
Back in 2004, Taipei stock market transactions totaled US$719.5 billion, accounting for 10.9 percent of the Asian market and ranking next only to Tokyo, Chien said.
Taipei’s ranking slipped to 7th last year with an annual turnover of US$711.5 billion, accounting for just a 3 percent share in the region, he said.
The government should quit taking money from the local bourse to finance national health insurance or long-term healthcare for senior citizens, Chien said.
It should also scrap the capital gains tax on active traders and initial public offerings, he said.
The number of active traders — people who trade between NT$100 million and NT$500 million a year — has dropped to 6,233, from 11,090 before talks of imposing a capital gains tax, Chien said.
The flight of active traders has sidelined retail investors, who used to account for 60 percent of the market, but the ratio has since dropped to 52.8 percent, he said.
“Taxes that cannot be collected [because of declining transactions] serve little to strengthen the national treasury or advance social fairness,” Chien said.
The government should come up with more practical and feasible ways to improve the nation’s finances, he said.
As of last month, securities transaction tax revenues amounted to NT$40.1 billion, down 10.1 percent from a year earlier, Ministry of Finance data showed.
Chien said the data indicated that the market has yet to regain confidence, though the legislature has introduced a three-year moratorium on the capital gains tax.
Chien said he and his colleagues are set to lobby lawmakers to revise the law ahead of the presidential and legislative elections next year.
However, Minister of Finance Chang Sheng-ford (張盛和) dismissed the link between the shrinking stock trading and the capital gains tax, saying that there is no single deal that has paid any capital gains tax thus far this year.
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