Taipei-The Cabinet on Thursday approved a draft amendment to the Securities Transaction Tax Act that would extend the tax reduction on intraday trading transactions for three years until Dec. 31, 2024.
The draft amendment bill, put forth by the Ministry of Finance (MOF), now has to be sent to the Legislature for deliberation.
The government in 2017 introduced a tax incentive for intraday trading, cutting the rate from 0.3 percent to 0.15 percent, with the aim of boosting day trading turnover on the local stock market.
The lower tax rate, however, is due to expire at the end of this year.
Intraday trading refers to a practice whereby investors can buy and sell the same stock in a single trading session.
According to the finance ministry, the transaction tax cut has driven up the volume of share transactions in Taiwan and boosted the momentum and liquidity of the stock market, while promoting the long-term development of the securities market.
Since the introduction of the tax cut in April 2017, the volume of day trading on the Taiwan market has increased from less than 10 percent of total trading on the main board and the over-the-counter market in 2016 to 45 percent in July 2021, according to the MOF.
Meanwhile, the average daily day trading transaction value of Taiwan stocks climbed from NT$36.5 billion (US$1.3 billion) in the first year of the concessionary tax rate, 2017-2018, to a high of NT$300.8 billion in July this year, the ministry said.
The government’s average daily tax revenue from day trading transactions has climbed to NT$450 million, compared with NT$56 million in the first year of the tax cut, the MOF said.
Deputy Finance Minister Lee Ching-hua (???) said that the ministry proposed the draft bill to extend the transaction tax cut for another three years to prevent uncertainty in the local stock market.
On the question of whether the extension would fuel speculation on the stock market, Lee said that speculation and investment both play a role in the equity market, and day trading should be allowed as part of regular stock transaction activities, so as to boost trading volume.
He said that in the first seven months of 2021, day trading accounted for around 40 percent of the total trading volume in Taiwan, which was a reasonable ratio, compared with 52 percent in the United States, 35 percent in the United Kingdom and 87.5 percent in South Korea.
The Cabinet’s approval of the tax cut extension came after shares in Taiwan plunged for nine consecutive sessions earlier this month, amid concern over the pending expiry of the lower rate.
The market recovered some of its heavy losses Wednesday but plunged again Thursday by more than 450 points, or 2.68 percent, to end at 16,375.4.
Source: Focus Taiwan News Channel