Taiwan Today

The Tax Reform Committee under the Executive Yuan is likely to recommend that the government reinstate capital gains taxes on stock investments by corporations, it has been reported. In its preliminary report on the issue, the committee proposed at least three main options: maintaining the status quo, with no capital gains taxes for either corporations or individuals; a full-scale resumption of the tax on corporations, but no taxes on individuals; a complete resumption of the tax on corporations, and a partial resumption of the tax on individuals. Within the three main options are some minor variations. For instance, for both the second and third options it might be possible for the capital gains taxes to be phased in gradually, beginning with a tax on capital gains from the trading of unlisted stocks. In light of the enormous consequences the tax is likely have on the country’s stock markets, the committee has suggested adopting an approach with the minimum possible impact. The committee will convene as early as this week to discuss the three alternatives and will submit its recommendations to the Cabinet for approval. The Ministry of Finance and some local scholars recommended levying the tax on corporations as the first step, as these institutional investors usually keep detailed records of their stock transactions. MOF officials added that the move will help make the country’s tax system more reasonable, as corporations will be able to offset their investment losses against their capital gains when filing their tax returns. But these officials also stressed that the resumption requires a public consensus, and that the ministry will not make any hasty move without the citizens’ support. The country has not levied a capital gains tax on individual stock investors since 1963. The only exceptions were in 1974 and 1989, when the tax was resumed but then terminated again after a one-year period. Corporations and institutional investors have been required to pay the tax on and off over the years. Neither individuals nor corporations have had to pay capital gains taxes on stock investments since 1990. (SFC-HZW)