The Legislative Yuan yesterday passed an amendment to the Securities Transaction Tax Act (證券交易稅條例) that extends a tax cut on day-trading transactions through the end of 2024.
The cut — which reduces taxes on traders buying stock and selling it later in the same session from 0.003 percent to 0.0015 percent — had been set to expire on Friday next week.
Seeking to boost market liquidity and higher turnover, while attracting more investors, the government first implemented the tax cut for one year on April 28, 2017.
In April 2018, the measure was extended for three years and eight months.
On Aug. 19, the Executive Yuan approved an amendment to the act that would extend the tax cut through the end of 2024 and sent the bill to the legislature for review.
The Cabinet had hoped that the legislature would approve the extension as quickly as possible to help maintain momentum in the stock market, which lost some steam at the end of the summer.
In reviewing the measure, lawmakers engaged in heated debates that failed to create a consensus.
Other versions of the measure were proposed by the Democratic Progressive Party (DPP) — legislators Shen Fa-hui (沈發惠), Chen Ting-fei (陳亭妃) and Wang Mei-hui (王美惠) — by the Chinese Nationalist Party (KMT) — legislators Tseng Ming-chung (曾銘宗), Chang Yu-mei (張育美) and Lu Ming-che (魯明哲) — and by independent Legislator Huang Kuo-shu (張國書).
On Tuesday last week, Legislative Speaker You Si-kun (游錫堃) invited lawmakers from the party caucuses to join the negotiations, and they reached a consensus to support the Cabinet’s version.
Minister of Finance Su Jain-rong (蘇建榮) said that his ministry would regularly review the tax cut’s impact on the TAIEX.
For now, the tax cut should not be permanent so that the equity market can reflect industry conditions and companies’ economic fundamentals, Su said.
The measure needs a deadline to safeguard taxpayers’ interests, as well as the nation’s taxation and financial integrity, Su added.
Market analysts have said that local investors favor day trading and have taken advantage of the tax cut to trade old-economy stocks, especially in the shipping industry.
The Financial Supervisory Commission is monitoring volatility due to day trading in large-cap shipping stocks to protect investors.
Analysts said that the TAIEX reacted positively to the extension, soaring more than 100 points yesterday morning, despite volatility on the US markets overnight.
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