BEIJING: After a heated debate, the Legislative Yuan’s Finance Committee decided to postpone a stock gains tax targeting investors who trade at least NT$1 billion (US$31.85 million) worth of shares in a single year.
The tax had been approved two years ago and was scheduled to take effect Jan. 1, 2015. The decision to postpone it does not solve the problem and has not been well received among stock investors.
The proper way to deal with the issue is to abolish the tax targeting big traders and maintain a capital gains tax on those who sell over NT$1 billion worth of IPO shares within a year.
People who own huge IPO shares are usually major shareholders in companies. These shares are often subscribed at their par value, but after the companies are listed on the stock market, the value of the shares usually spike sharply. The profits obtained from the sales of IPO shares are undoubtedly capital gains and should be taxed.
Taxing the sales of IPO shares is consistent with the principle of fairness and involves few technical problems. Furthermore, it is difficult to evade such a tax.
The situation is different when it comes to the trading of listed shares. To avoid taxes, people can choose to trade in different markets or adopt the status of foreign institutional investors.
