Vice Premier Paul Chiu (邱正雄) last night announced that the securities transaction tax would be cut from 0.3 percent of the transaction price to 0.15 percent for half a year.
“Capital market is an important part of the financial market and an essential channel for businesses to raise funds … to help businesses raise funds in a slackening economy, restore stock investors’ confidence and help the stock market sail through the international economic quagmire,” Chiu told a news conference held at 10pm.
As the 0.3 percent tax rate is stipulated by Article 2 of the Securities Transaction Tax Act (證券交易稅條例), the Executive Yuan will propose an amendment to the legislature for review.
Chiu said the reduction in the stock exchange tax can help boost the stock market, as shown when the turnout rose to NT$121.7 billion from NT$ 3.3 billion a year after the stock exchange tax was cut in half in Jan. 1989 and the turnout increased to NT$101.267 billion from NT$22.553 billion a year after the tax was cut in half in Feb. 1993.
The decision to slash the securities transaction tax was reached after a three hour meeting between ranking officials held at the Presidential Office late yesterday afternoon.
President Ma Ying-jeou (馬英九) met Premier Liu Chao-shiuan (劉兆玄) and economic officials at 5:30pm to deal with the controversial issue of whether the securities transaction tax should be scrapped in a bid to revive the stock market.
After promising to take a backseat on domestic affairs, Ma was forced to deal with the issue when the officials brought their proposal for his approval yesterday afternoon.
Vice President Vincent Siew (蕭萬長), who recently voiced concerns over the Cabinet’s ability to cope with the current economic downturn, was also at the meeting.
Some Chinese Nationalist Party (KMT) lawmakers have suggested Siew replace Liu and reshuffle the Cabinet, while Legislative Speaker Wang Jin-pyng (王金平) have recommended that the Cabinet consult Siew more frequently on economic and financial matters.
Noting Siew’s rich experience in the field of economics, Ma lauded Siew as a “problem solver” who could deal with the nation’s economic ills when he announced his choice of a running mate in late 2006.
Some KMT lawmakers have complained that Siew has never been given a chance to put his strengths to work.
Slashing the stock transaction tax, which currently stands at 0.3 percent, is one of the measures under consideration to boost market sentiment, following a spate of suggestions from the business community and the equity market’s dismal performance.
The issue became a subject of controversy when Minister of Finance Lee Sush-der’s (李述德) remarks at a news conference on Monday were widely interpreted by local media as meaning the government would cut the stock transaction tax.
At the request of the Executive Yuan, the ministry issued a statement later that night revising Lee’s remarks, saying it has yet to reach a decision on the matter.
Some have questioned the need to cut the stock transaction tax as the country doesn’t impose a levy on capital gains from securities. It could also result in a loss in tax revenues of NT$60 billion (US$1.88 billion) per annum if the tax were cut in half.
The stock transaction tax will be one of the economic proposals to be discussed at the Cabinet meeting today, where a review of new tax incentives to encourage businesses investment, interest subsidies for housing loans and other measures aimed at propping up the economy will be conducted.
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