TAIPEI: A cut in the transaction tax for day trading is expected to go into effect in late April at the earliest, on hopes that the eased financial burden shouldered by equity investors will boost turnover on the broader market, the Ministry of Finance (MOF) said Thursday.
The expected implementation timetable was announced by the MOF after the Legislative Yuan passed the first reading of a bill earlier in the day to lower the transaction tax to 0.15 percent from the current 0.3 percent for one year.
Day trading allows traders to buy first and sell later or sell first and buy later in a single session. Since June 2014, the Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, has expanded the range of day trading at an accelerated pace.
The Legislative Yuan is scheduled to send the bill for second and final readings in April and it is reasonable for the MOF to expect that the earliest implementation date will be in late April, market analysts said, adding that they see no difficulty for the bill to clear the floor of the Legislative Yuan.
Minister of Finance Sheu Yu-jer said that although a cut in the transaction tax for day trading will lower tax revenue by NT$3.75 billion (US$123 million) a year, if daily turnover rises by NT$10 billion a day due to the new tax scheme, the tax revenue loss could be recovered.
According to the FSC, day trading is likely to account for 15 percent of the total trading volume on the main board, up from the current 10 percent in reflection of the tax cut. As for the over-the-counter market, day trading could make up 22.5 percent of the total turnover after the cut, up from the current 15 percent, the FSC said.
Taiwan Stock Exchange (TWSE) Chairman Shih Jun-ji said the tax cut is expected to bring in an additional NT$6.7 billion in turnover of day trading and an additional NT$10 billion in non-day trading turnover per day on the main board. The TWSE operates the local main board.
According to the TWSE, aggregate turnover in the local equity market for 2016 totaled about NT$18.9 trillion, marking the third consecutive year in which the annual trading volume had moved lower. The 2016 figure is the lowest level in 15 years, the TWSE data shows.
