(Bloomberg) -- Taiwan Finance Minister Chuang Tsui-yun urged lawmakers to renew a day-trading tax cut by Dec. 31 at the latest, or risk complicating revenue collection and hurting market sentiment.
The transaction tax was halved from 0.3% to 0.15% in 2017 and has been credited with helping boost turnover in Taiwan’s $2.5 trillion stock market, the world’s tenth-biggest by value. The reduction, which has been extended several times, will expire by year-end if lawmakers fail to vote on another reinstatement.
“It’s creating uncertainty now, and we hope lawmakers can pass an extension of the day-trading tax cut,” Chuang told legislators Monday, adding that regulators including the Financial Supervisory Commission have made preparations in case the tax cut isn’t renewed. “It’s important for stock investors to feel secure.”
The failure to pass a measure that enjoys widespread support underscores how wrangling in parliament, where two allied opposition parties together hold a narrow majority over the president’s party, is affecting broader legislation. The past month has seen sometimes violent clashes between lawmakers amid disputes over everything from the budget to the appointment of new judges.
Taiwan stocks’ trading volume may shrink 30% if the tax reduction isn’t extended by another three years, the Taipei-based Economic Daily News reported, citing Financial Supervisory Commission Vice Chairperson Chen Yen-liang. Last week, day trading accounted for roughly one-fifth of trading volume and about 40% of value, according to Taiwan Stock Exchange data.
While the tax cut is on lawmakers’ agenda Tuesday, there’s no guarantee that they will vote on it.
Chuang made it clear that the government hopes the tax cut will eventually be renewed. It could be enacted retrospectively, but that would be problematic, she said.
“It’ll be complicated if the extension doesn’t pass by the deadline of end-2024 as the government would need to collect the 0.3% tax rate first and then refund later if it’s later cut,” Chuang said.
©2024 Bloomberg L.P.