TAIPEI, April 13 Taiwan's introduction of a
capital gains tax will probably not drive investors away from
the stock market, though it might reduce turnover as the new tax
promotes longer-term investment, some fund managers said on
The government revealed its plan on Thursday to tax capital
gains on shares and futures trading, but stressed that foreign
investors who do not have permanent offices on the island will
be exempted from the new levy.
Foreign investors account for one-third of trading in the
island's market, which is heavily weighed to tech companies such
as TSMC, the world's biggest contract microchip maker,
which are highly sought after for regional and global
"The scope of the tax is a bit bigger than expected. Having
said that, the tax's impact has mostly been priced in the
market's fall earlier in April," said Alex Hu, propriety trading
chief of Mega Securities.
"Foreign investors would be barely affected by the tax, while
local investors would be hit a little bit. Those to be hit
hardest are individual investors who make big money on stocks
and futures," he said.
The new tax, which sets a 20 percent rate for some
individual investors and a 12 perent rate for local
institutional investors, will take effect in
"We look at returns. We don't stop investing because of a
tax," said Yu Reming, chief investment officer of Prudential
Financial' s fund arm in Taiwan.
Oscar Chung, who manages over T$10 billion ($340 million)
for Capital Asset Management, agreed.
"We will not adjust our strategy due to the tax," he said.
"The tax will knock off a portion of profits to be made by
investors, but it does not change corporate earnings prospects."
Taiwan stocks rose 1.4 percent on Friday to trade at
7,772.09, their highest intraday level in almost two weeks. TSMC
was up nearly 3 percent.
So far in 2012, the market is up about 10 percent, slightly
lagging the MSCI ex-Japan index.
Doubts over whether the tax would be implemented and how big
its scope had weighed on the market and made it one of Asia's
worst performers this month.
Investors who hold stocks for over five years will be taxed
on half of their trading gains, promoting longer-term
investments. But that also could reduce market turnover in the
long run, according to a research report published by Deutsch
(Reporting by Clare Jim and Faith Hung; Editing by Kim Coghill)