The furor over the reintroduction of a capital gains tax has inflicted a heavy blow on the stock market since the proposal first appeared in papers on March 29. That day, the TAIEX dropped more than 2 percent from 8,038 points the previous day, and it is now at roughly 7,500 points.
Many specialists have discussed the positive and negative impact of such a tax, so I will not delve into that any further.
Because President Ma Ying-jeou (馬英九) and Minister of Finance Christina Liu (劉憶如) like to paint themselves as the personifications of justness and fairness, they should not be allowed any exemptions, as this would be unfair and unjust to those who do not enjoy exemptions. As for those who do not enjoy exemptions, but have money, they will always have a few options up their sleeve which they can play. This means that the weight will fall on the shoulders of the already-struggling middle class.
Each time the idea of reimposing the capital gains tax is mentioned, the stock market has crashed. This makes it easy for those who want to manipulate the stock market. Liu must be aware of this, since her mother, Shirley Kuo (郭婉容), experienced this herself in 1988 when she was the minister of finance.
In February, the day after Premier Sean Chen (陳冲) first talked about bringing back the tax, the TAIEX plummeted by 135 points. If the government wants to push this legislation through, it should make the proper preparations and remedy the situation as soon as possible to reduce the shock to the market.
The day the news about the tax hit the papers was the day Morgan Stanley calculated final settlement prices for stock index futures. This greatly benefitted big short-selling stock index futures investors, but most foreign investors who held long positions lost out. After that, the tax became a daily topic of discussion, allowing some people to spread all sorts of rumors to manipulate the market. This went on for a month and the market suffered. However, for certain institutions it was a good opportunity for making profits.
As things stand now, the public may have to wait until next year for a clear answer on the tax. Does this mean that the stock market will have to continue to suffer for another long year because of this issue? This would be in complete opposition to Ma’s usual spiel about nipping things in the bud and would only allow manipulators to continue to profit.
In dealing with the securities income tax, Ma has always had his own “chief economic designer,” but that person is no longer Vice President Vincent Siew (蕭萬長); it is now Liu.
According to reports in the Chinese-language Wealth Magazine, a number of senior officials, including the premier, and KMT legislators have differing views on the tax. Executive Yuan Secretary-General Lin Yi-shih (林益世) has said it is all Liu’s fault — that whenever anyone expressed a differing opinion during discussions, the minister would always reply that she had reported the matter to the president, that he supported it and it therefore cannot be changed.
How has Liu become so popular and gotten so much say? No doubt it is because of the way she used the Yuchang case to attack former DPP chairperson Tsai Ing-wen (蔡英文) during the presidential election campaign. Ma handles public dissatisfaction with the same technique he uses to win elections, and he listens to every word Liu feeds him, so how can we expect him to bother with the problems on the stock market?
Paul Lin is a political commentato
Translated by Drew Cameron
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