Wednesday, May 29, 2013

Good-bye capital gains tax, we hardly knew ya

One of the many things this mess with the Phils has enabled the government to divert public attention from the drive to eliminate the capital gains tax. As a tax on the wealthy which kicked in when the stock market crossed 8,500, it was odious to the KMT, the island's party of the 1%. In the latest "economic stimulus" package of the government, it will be killed....
One of the measures involved the legislature passing an amendment to the Income Tax Act (所得稅法) before the current session ends on Friday to drop the 8,500-point threshold that automatically triggers the capital gains tax for individual investors, Jiang said.

The Chinese Nationalist Party (KMT) has proposed removing the requirement that the TAIEX surpass 8,500 points for the tax to be imposed and replace it with a tax on investors who sell NT$1 billion (US$33.3 million) worth of shares during one calendar year.

The premier said that abolishing the threshold would turn the economy around because it would be like “lifting the cover off a pot” to let the “suffocated” economy breathe.
Alas, removing the capital gains tax will simply result in more capital being hoarded and then shipped out of the country instead of being reinvested here and driving economic growth in Taiwan. It will only make the rich richer, and Taiwan being so expensive, the poor cannot even console themselves with babies.

UDN rightly complained:
Despite the many steps taken, however, nothing has seemed to work. The latest package focuses on expanding consumer spending, boosting domestic investment, encouraging innovation and new business start-ups, and revising the capital gains tax on stock sales. The content is not at all inspiring because it did not go beyond the existing policy framework.

Moreover, the government is planning to invest a mere NT$3.24 billion over five years in the new package. How can we expect it to rescue Taiwan's weak economy?
Figure it out. In US dollars, $3.24 billion is a little over US$100 million, or $20 million annually for the "stimulus". Peanuts.

According to the TT article, the DGBAS lowered its estimate of growth for the year to 2.4%. Recall that industrial output fell for the third straight month in April, as Bloomberg noted in its roundup of economic indicators.
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1 comment:

Domenic said...

Thanks, my awesome friend!