The Financial Supervisory Commission (FSC) yesterday said that it would begin reviewing changes to the tax scheme for day trading as part of plans aimed at boosting anemic turnover on the local bourse.
During a question-and-answer session at a meeting of the legislature’s Finance Committee in Taipei, Chinese Nationalist Party (KMT) Legislator-at-large William Tseng (曾銘宗) proposed a new tax scheme for day trading based on net transactions to ease tax expenses for investors.
FSC Chairman Lee Ruey-tsang (李瑞倉) said that the commission would fast-track talks with the Ministry of Finance about the proposal.
“Specific tax changes related to day trading have a good chance of being implemented swiftly, as they do not involve changing the capital gains tax rate, which requires a more complex legislative process,” Lee said, adding that amendments could be reviewed separately ahead of a major tax overhaul scheduled to begin in May or June.
Day trading accounts for only about 10 percent of the local bourse’s turnover, compared with 48.5 percent in the US, 45 percent in Japan, 36 percent in the UK and 26 percent in Hong Kong.
Tseng said more attractive tax terms could boost overall turnover, adding that a day trader would only be required to pay taxes on positions that have not been closed during the session, as opposed to having taxes levied on each transaction.
For example, if an investor sells 10,000 shares in a company, then trims the short positions by buying 7,000 shares, only the net 3,000 shares would be taxed, according to Tseng’s proposal.
However, Lee said that the proposal requires further analysis, as there are no international precedents.
Deputy Minister of Finance Su Jain-rong (蘇建榮) said that the ministry would not rule out consideration of the proposal.
Earlier, the commission also announced that the number of stocks allowed for day trading has been increased by 23 to 1,405, representing 98 percent of shares listed on the nation’s main board.
The commission also announced that limits on investments in local shares by local banks were to be eased, which is expected to free up NT$732.1 billion (US$23.18 billion) in funds.
Previously, investments in local equities were limited to 5 percent of a bank’s net worth, but beginning next month, the total investment in local stocks is to be capped at 30 percent of a bank’s net worth, the commission said.
Domestic banks have a combined net worth of about NT$3 trillion, indicating a maximum investment quota of about NT$858.8 billion, of which NT$126.7 billion has been utilized, commission data showed.
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