TAIPEI: The Taiwan Stock Exchange (TWSE) yesterday said that the government’s plan to cut the transaction tax on day trading is part of long-term measures to revive waning turnover, in response to criticism that the change would only promote risky market speculation.
“The tax reduction is a first step and a part of the government’s policy package to address structural issues,” TWSE chairman Shih Jun-ji told reporters yesterday.
The government has a package to optimize the nation’s revenue sources, which includes halving the tax exemption threshold for dividend income and re-examining the levying of supplementary National Health Insurance premiums and the luxury tax, he said.
A major review by the Ministry of Finance is expected to begin in May or June, Shih said, adding that differences in tax obligations between domestic and foreign companies would also be considered.
Reduced transaction costs would offer incentives to investors to trade more, which would boost turnover, while investors would also benefit from more efficient price discovery in the market, he said.
“As it is possible for day trading orders to be matched with conventional market orders, the tax change could increase turnover, but we cannot predict by how much,” Shih said.
A 0.3 percent transaction tax would still be levied on conventional market orders, which would mitigate revenue losses for the government, Shih said, adding that since day trading was made available in 2014, its contribution to overall turnover has risen from 1.5 percent to 9 percent.
It is difficult to predict the increase in turnover, as the contribution by day trading to turnover varies between 35 percent and 50 percent among major markets abroad, he added.
The TAIEX rose 11 percent annually at the end of last year, outpacing gains by its peers in Asia and rebounding from a 10.4 percent tumble in 2015, while listed stocks maintained a favorable 4 percent dividend yield, Shih said, adding that such improvements are often overlooked.
However, average daily turnover last year declined 16.9 percent to NT$68.73 billion (US$2.13 billion) annually and at a faster pace than a 12.1 percent drop recorded in 2015, TWSE data showed.
The decline was contained in light of steeper drops in neighboring markets, such as a 34.5 percent drop in Hong Kong and 65 percent in Shanghai, Shih said.
