Average daily day trading transaction on the local stock market climbed to a high of NT$66.1 billion (US$2.36 billion) in March, prompting a call for the Financial Supervisory Commission (FSC) to rethink an extension of a tax cut on day trading transactions.
In April 2017, a tax cut on day trading transactions — from 0.003 percent to 0.0015 percent — took effect. It was to return to the previous level next year, but the commission and the Ministry of Finance have proposed extended the cut for another five years.
Experts said the policy favors intraday traders and has made the local stock market a “casino.”
Appacus Foundation president Sean Chen (陳沖), a former vice premier and former FSC chairman, on Monday said that the tax cut extension would incentivize investors to engage in day trading rather than make long-term investments.
The tax cut was implemented as a “shot in arm” for the market, as turnover was less than NT$100 billion in a single day, but turnover soared to more than NT$700 billion last month, Chen said.
If the government normalizes the tax cut, it would send a message to investors that day trading has better tax rates than long-term investing, and would make the market a “casino,” he said.
FSC Chairman Thomas Huang (黃天牧) told reporters on the sidelines of an event in Taipei on Monday that while he respected Chen’s opinion, he did not agree with the casino analogy.
Whether reducing a single tax makes the market a “casino” needs careful consideration, Huang said, adding that further discussion about the extension were welcomed.
Day trading is just a mechanism that allows investors to make profits by buying or selling shares over short periods, and can boost the market trading volume, the commission said.
Average daily day trading transaction advanced to a record NT$66.1 billion in March, accounting for 30.34 percent of total market turnover, up from an average of NT$10.6 billion and a weighting of 9.63 percent from April 2016 to March 2017, a year before the tax cut took effect, FSC data showed.
The average daily amount of day trading transactions rose to NT$37.5 billion during the first year of the tax reduction, making up 22.34 percent of total transactions, the data showed.
The number of day traders increased to 108,000 at the end of last year, up from 44,000 a year earlier, the data showed.
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