Minister of Finance Lee Sush-der (李述德) confirmed yesterday the government is considering slashing the stock transaction tax in an attempt to boost the stock market after it plunged 11 percent, or 783.83 points, last week.
Lee told a morning news conference that the ministry was weighing the pros and cons of lowering the stock transaction tax as different sectors have called for the move to increase confidence in the local bourse.
“Like the public, the government is deeply concerned about the stock performance,” Lee said. “We have heard the call to lower the stock transaction tax and will give serious thought to the matter.”
However, the Ministry of Finance (MOF) issued an emergency statement last night, saying it has yet to reach a conclusion on whether or not to lower the stock transaction tax after local media portrayed the cut as a done deal.
“The proposed tax cut, [if accepted], will have to go through legal revisions before it can be put into practice,” the ministry said in the statement.
The tax currently stands at 0.3 percent of all stock transactions. The business community has pressed the government to halve the levy, arguing that an immediate and concrete measure is necessary to reverse bearish sentiment among investors.
Lee said that the ministry has been authorized to take steps as it sees fit to bolster the TAIEX, though he openly remarked last week that it would be ill-advised for the government to intervene.
As for the size and timing of the cut, Lee said the ministry was still assessing the measure and would unveil the details after they are finalized.
“The ministry is approaching the matter cautiously and had better avoid making comments until the evaluation is over,” Lee said.
The minister said the government is considering lowering inheritance, business and corporate income taxes as part of the effort to make the country more favorable for economic growth.
Vice Minister of Finance Chang Sheng-ho (張盛和) said that when the government cut the stock transaction tax from 0.6 percent to the present 0.3 percent in 1993, the benchmark index shot up 29 percent in a month and remained up 17 percent six months later.
Meanwhile, a number of Chinese Nationalist Party (KMT) legislators yesterday said they were in favor of lowering the stock transaction tax.
When asked for comment, KMT Legislator Ting Shou-chung (丁守中) urged the government to lower the tax as soon as possible.
“Many other nations have also tried to boost their stock markets by lowering their stock transaction tax. Therefore, I believe the measure would prove effective in reviving the stock market,” Ting said.
KMT Legislator Chiu Yi (邱毅) said the government should work hard to lift investor confidence in the domestic stock market by lowering the tax even though the measure might only have a temporary positive impact on the market.
KMT Legislator Alex Fai (費鴻泰) told reporters that he only supported temporarily halving the transaction tax.
“We can halve the stock transaction tax from 0.3 percent to 0.15 percent now, but we need to adjust the rate back to 0.3 percent once the TAIEX reaches 8,000 because the stock transaction tax accounts for more than 10 percent of the nation’s tax revenue,” Fai said.
However, KMT Legislator Lee Hung-chun (李鴻鈞) voiced opposition to the idea, saying that the recent plunge in the domestic stock market was the result of a poor global economy.
He said the government should overhaul the entire tax system instead of only “treating where the pain is.”
Meanwhile, saying that the reduction of the stock transaction tax is a serious matter that requires comprehensive discussion, the director of the Democratic Progressive Party’s (DPP) Department of Youth Development, Chao Tien-lin (趙天麟), said, adding that the effect would be limited if the government introduces the measure only to boost the stock market’s short-term performance.
ADDITIONAL REPORTING BY RICH CHANG
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