Wednesday, April 11, 2012

Stock gains tax will only affect high income earners: Liu

Stock gains tax will only affect high income earners: Liu
Ministry of Finance (MOF) Minister Christina Liu 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.

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