Stock gains tax will only affect high income earners: Liu

By Camaron Kao ,The China Post

Ministry of Finance (MOF) Minister Christina Liu (劉憶如) yesterday said that the MOF will submit its version of a stock market gains tax to the Executive Yuan on Thursday. According to Liu, the new tax will affect people in high income brackets and will start next year. Since the government needs time to obtain income data, investors will need to report the income they gain from the stock market in 2012 starting May 2013, according to the MOF. In terms of the cost of buying stocks, investors can choose from two calculation methods, said Liu. People can use either the price they actually paid when buying the stock or any closing price during a certain period before the implementation of the tax as the cost used to calculate their profit, she said, but did elaborate on how long the period will be. Liu stated that there is a clear consensus of the starting date and how the cost is identified in the second meeting of the committee of tax reform concerning capital gains in the stock market.

As for whether to combine the gains in the stock market with other income or to impose an alternative minimum tax upon gains in the stock market, Liu said there was no agreement in the meeting and there will not be a consensus among scholars. Thus, according to Liu, the MOF will not hold another meeting and will propose its own version by Thursday. The MOF will make the decision on its own, said Liu.

Two Possible Ways of Tax Collection If the MOF applies the alternative minimum tax method upon the new tax, only people making a profit of more than NT$6 million a year will be taxed.

In this way, individual investors are less likely to be affected, while corporate investors, with a larger amount of money to invest in the stock market, are more likely to be influenced. It is therefore likely that big investors may look for individuals and distribute their investment under different names to avoid being taxed. If the MOF combines the capital gains in the stock market with other income, people will be taxed based on their total income.

The tax rate is from 5 percent to 40 percent, based on the total income the person earns in a year. Furthermore, if a person loses in the stock market, his or her loss can be subtracted from the amount of total income in the following three years.