Taiwan Capital Gains Tax Revisions Delayed by Opposition Party; Lawmakers are weighing a tax cut after stock trading volume declined by as much as 30 percent in the first four months of the year

Taiwan Capital Gains Tax Revisions Delayed by Opposition Party

Taiwanese opposition lawmakers today delayed cutting a controversial capital gains tax on share sales of more than NT$1 billion ($33.3 million) and removing an index price threshold that depressed shares.

Tsai Chi-chang, a Democratic Progressive Party lawmaker, said his party doesn’t support the ruling Kuomintang’s proposals and favors its own plan for a flat tax on all capital gains, which “fits the idea of fairness and justice and increasing government revenue.” The benchmark Taiex index rose 0.5 percent to 8,281.42 as of 11:21 a.m. local time.

Lawmakers are weighing a tax cut after stock trading volume declined by as much as 30 percent in the first four months of the year, according to Credit Suisse Group AG. President Ma Ying-jeou’s administration and legislators argued over about 10 versions of the tax last year, prompting then-Finance Minister Christina Liu to step down. The Taiex lost 13 percent during the period.DPP lawmaker Huang Wei-cher said after a party caucus meeting today the tax bill may be taken up in extra legislative sessions on June 13-27 or in late July.

The ruling Kuomintang has proposed cutting the tax on capital gains on transactions of more than NT$1 billion to 0.1 percent from the 2.25 percent under the original law, according to a May 20 statement from the Ministry of Finance. It has also proposed removing a threshold of an 8,500-point close for the Taiex index before the tax could go into effect. Citigroup Inc. and UBS AG raised their Taiex targets in May on the threshold removal proposals.

Investor Hesitation

“Now that there’s a delay, the 8,500 threshold will still suppress index performance,” Sophie Chang, a fund manager at Prudential Financial Securities Investment, said in a phone interview in Taipei. “Investors will hesitate when the index climbs toward 8,500.”

Taiwanese residents invested more capital overseas in the last two quarters of 2012 from the quarter earlier, Credit Suisse analyst Christiaan Tuntono wrote in a May 20 report, citing the island’s central bank. The government’s transaction tax revenue fell by 24 percent in the first four months of the year, according to Tuntono.

To contact the reporters on this story: Chinmei Sung in Taipei at csung4@bloomberg.net; Weiyi Lim in Singapore at wlim26@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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