Abolish Large Investor Provisions, Avoid Lose/Lose/Lose Proposition

Abolish Large Investor Provisions, Avoid Lose/Lose/Lose Proposition
China Times Editorial (Taipei, Taiwan, ROC)
A Translation
December 19, 2014

Executive Summary: It is a wise man who acknowledges past errors. Capital gains tax reform has been tossed around for over two years. The Large Investor Provisions is a lose/lose/lose proposition for large investors, treasury revenue, and capital markets. The legislature must assume responsibility. It must swiftly abolish the Large Investor Provisions. It must retain the provisions for taxation of newly listed shares. That is the right way to proceed.

Full Text Below:

Following a heated debate, the Legislative Yuan Finance Committee has decided to postpone implementation of the Large Investor Provisions for three years. This major tax provision was set to take effect on New Year's Day next year. Their content has not been changed. This has temporarily defused a ticking bomb, but has done nothing to solve the problem. Financial markets, the media and the public reacted badly. They consider it a farce, and a case of the old “Father and son ride a donkey” parable.

During the legislative debate, FSC Chairman Tseng Ming-chung said that tax policy should take into account four principles. Revenue, the national economy, social justice, and taxation methods. This is something many textbooks advocate. It is the crystallized wisdom of tax experts, scholars, and the experience of many nations. It deserves careful consideration.

Given these four principles, it should be clear how to reform the taxation of securities income. The capital gains tax on newly listed stocks (IPOs) should be retained. But the so-called Large Investor Provisions should be abolished. Listed companies that sell 10 billion NT in shares within one year should be subject to capital gains taxes.

The reason to why IPO capital gains should be retained is simple. Those able to accumulate a large number of IPO shares are invariably the largest shareholders in newly created or expanded companies. These shareholder stocks come in many denominations. But following an IPO, they are several to a hundred times their original worth. This is typical for capital gains, and of course should be taxed. Such a tax is consistent with the principle of fairness. Levying it poses no technical difficulties. Taxpayers cannot easily evade it. It is unlikely people will refuse to invest in new businesses, expand existing businesses, or list them on the stock market for this reason.

Trading in listed shares meanwhile, is completely different. If taxes must be levied, investors can choose not to transact them on the market. They can resort to foreign corporations, i.e., foreign transactions. Government agencies can establish tax regulations. But they cannot prevent people from changing their behavior to evade taxes. The 2012 tax reform program was passed with several amendments. The market did not fall below 8500 points. But volume failed to recover. In April 2012, former Finance Minister Christina Liu promised securities tax reform. In 2012 Taiwan stock market turnover was 20.78 trillion NT. In 2013 it was 19.60 trillion NT. Compare this to the 28.89 trillion NT Taiwan stock market turnover in 2010, and the 26.99 trillion NT level in 2011. Volume has fallen significantly. Estimates for this year are not optimistic. As of late November, they were 21.02 trillion NT.

Trading volume reduction directly affects treasury income. Between 2010 and 2013 income from capital gains taxeswere 104.57 billion NT, 93.99 billion NT, 71.94 billion NT, and 71.38 billion NT, respectively. Obviously capital gains tax reform reduced Treasury income by about 30 billion NT a year. As a result, from a tax perspective, this tax should be reviewed. This tax failed to increase treasury revenue. Instead, it led to treasury revenue losses. This was contrary to the original purpose of national taxation. It also reduced stock market momentum. It indirectly impacted the ability of listed companies to acquire financing. The imposition of this tax, violated the principle of "revenue income." It violated the principle of a "national economy." The government could have used this 30 billion in revenue, to help the underprivileged. It could have paid for a earned income tax credit, new residential construction for young people, public transit, or other public works. These would have helped reduce the disparity between rich and poor, and implemented social justice. The Large Investor Provisions are a major contributor to revenue loss. It is of course, also a violation of the principle of "social justice."

Some may say that since so many stock transactions took place, paying more in taxes is common sense. In fact, this is the essence of the current stock market securities transaction tax. The Taiwan stock market securities transaction tax is as high as 3 per thousand. It is among the best in Asia and the world. The reason is the stock market securities transaction tax. In 1988 the Ministry of Finance announced that in 1989 the stock market transaction tax would be reinstated. The news caused the Taiwan stock market to plummet 19 straight trading days. In January 1990, the Treasury ceased collecting capital gains taxes. Instead, it increased the stock market transaction tax. Revenue from stock market transaction taxes increased from 1.5 per thousand to 6 per thousand. The economy declined, stimulating stock market turnover. By 1993 it had fallen to 3 per thousand. That is the current tax rate. But its essence has not changed. It combines stock market transaction taxes and estimated stock market transaction taxes.

The stock market exchange tax adopts a "taxation by volume" approach. It ensures that investors with large trading volumes are subject to higher taxes. This is in line with the principle of fairness. Reinstate the old system, abolish the Large Investor Provisions, allow large investors to make large returns. The treasury will once again receive 30 billion NT in revenues, and large investors will pay for it. If these taxes are used for social welfare or infrastructure construction, won’t that be a win/win?

It is a wise man who acknowledges past errors. Capital gains tax reform has been tossed around for over two years. The Large Investor Provisions is a lose/lose/lose proposition for large investors, treasury revenue, and capital markets. The legislature must assume responsibility. It must swiftly abolish the Large Investor Provisions. It must retain the provisions for taxation of newly listed shares. That is the right way to proceed.

社論－速廢大戶條款 擺脫三輸局面
2014年12月19日 04:10
本報訊

立法院財政委員會經過激烈辯論後，決議原訂明年元旦起實施的證所稅大戶條款，將暫緩3年實施，其內容則不做改變。雖然暫時拆解了就要引爆的引信，但沒有達到基本上解決問題的效果，金融市場、媒體與社會大眾普遍反應不好，認為又是一場父子騎驢的荒謬演出。

我們認為，立法院辯論中，金管會主委曾銘宗強調，租稅政策應考量4個原則，就是財政收入、國民經濟、社會公平和課稅技術。這是許多教科書中所楬櫫的原則，也是學者專家們根據租稅理論和各國經驗所得到的結晶，應予重視。

如果從這4個原則來看，證券交易所得稅該怎麼修，就很清楚了，就是應當保留新上市（IPO）股票資本利得課稅，但是廢除所謂大戶條款，也就是1年內出售上市櫃公司股票金額達新台幣10億元以上者須課證所稅。

保留IPO資本利得的原因很簡單，凡是有能力累積大量IPO股票者，必為新創或擴充中公司的大股東。這些股東的股票，很多是從面額認購而來，但在新上市以後，身價變成原來的數倍到百倍不等，這是標準的資本利得，當然應當課稅。這樣的稅符合公平原則，在課徵技術上並無困難，納稅人也不容易逃避。基本上，很難想像有投資人會因此而不創業，或不擴充其事業到上市櫃的標準。

但是已上市股票的交易，情況完全不同。如果有超額的稅要課，投資人可以選擇不到市場交易，或改用外國法人也就是外資身分交易。主管機關可以訂立課稅規則，但無法阻止潛在被課稅者以改變其行為來避稅。這就是為什麼101年證所稅改革方案通過後，幾經修正，即使已經拿掉了8500點的天險，成交量並未明顯恢復：101年4月，前財政部長劉憶如宣示推動證券交易所得稅稅制改革後，101年台股的成交量為20.78兆元、102年為19.60兆元，與99年台股成交金額28.89兆元、100年26.99兆元的水準相較，量能已減少許多。今年預估也不樂觀，至11月底止僅有21.02兆元。

交易量縮減，直接影響的就是國庫的收入。99年至102年證交稅的收入，分別為1045.7億元、939.9億元、719.4億元，以及713.8億元。顯見自提出證所稅的改革方案之後，國庫平均每年減少約300億元。這樣一來，就租稅原則來看，這個稅就應當要重新檢討。此稅非但不能增加國庫收入，反而造成國庫損失，與課稅的原始目的背道而馳，而且還讓股市的動能減少，間接影響上市公司在股市籌資的能量。所以，此稅之課徵，違反「財政收入」原則，也違反「國民經濟」原則。

如果有這300億的收入，政府可以用之於救濟弱勢、幫薪資所得者減稅、興建青年住宅或充實捷運等公共建設，這些都有助於改善貧富差距、落實社會公平。證所稅的大戶條款，是造成稅收損失的重大原因之一，當然就違反了「社會公平」原則。

或有人說，既然買賣股票這麼多，多繳點稅才合乎常理。事實上，這正是現行證交稅的本質。為什麼台灣股市的證券交易稅（證交稅）高達千分之3，在亞洲乃至世界名列前茅，就是因為其中已經隱含了證所稅。

民國77年財政部宣布自民國78年起復徵證所稅，消息一出，造成台股無量崩跌19個交易日，財政部遂於民國79年元月起停徵證所稅，改以調高證交稅取代，證交稅稅率因此由千分之1點5提高到千分之6。此稅後為了因應經濟景氣下滑，刺激股市成交量，曾於82年調降至千分之3，也就是現行稅率，但其本質並無改變，是綜合了交易課稅和由交易所設算的所得稅。

既然股市交易採「從量課稅」的方式，正好確保了交易量大的投資人，也會被課以較多的稅，符合公平原則。如果恢復舊制，廢除大戶條款，讓大戶回籠，而重新得到300億的稅收，這些稅不都是大戶繳的嗎？把這些稅拿來做社會福利或建設，不是雙贏嗎？

「知錯能改、善莫大焉」，證所稅的改革已經折騰兩年多，其中大戶條款尤其造成股市投資人、國庫稅收、資本市場三輸的局面。立法院應當有所為，有所不為，趕快廢除大戶條款，保留新上市股票資本利得課稅的規定，才是正途。