The extension of a transaction tax cut for day trading for another three years to the end of 2024 has been approved by the Legislative Yuan after lawmakers passed an amendment to the Securities Transaction Tax Act on Tuesday.
The approved bill will extend the transaction tax cut, which reduces the tax by half to 0.15 percent and had previously been set to end on Dec. 31, to the end of 2024, according to the Legislative Yuan.
Day trading refers to a practice in which investors buy and then sell the same stock or sell and then buy the same stock in a single trading session.
The government had implemented the day-trading tax cut for the first time on April 28, 2017 for one year through an approved amendment to the Securities Transaction Tax Act to boost market liquidity, paving the path for higher turnover.
The tax cut was aimed at the issue of light trading at that time by attracting more investors to trading.
In April 2018, when the tax cut ended, the reduction was extended for another three years and eight months into the end of 2021.
On Aug. 19, the Cabinet issued the greenlight to an amendment to the Securities Transaction Tax Act for an extension of the day-trading transaction tax cut for another three years before sending the bill to the Legislative Yuan for review.
Before the approval by the Legislature on Tuesday, the Cabinet had said that the day-trading transaction tax cut was expected to benefit the local equity market in the long term.
Ahead of the approval by the full house at the Legislative Yuan, lawmakers had been divided over extending the tax cut, engaging in heated debates that failed to create a consensus by Dec. 6.
Several lawmakers such as Shen Fa-hui (???), Chen Ting-fei (???), and Wang Mei-hui (???) from the ruling Democratic Progressive Party; Tseng Ming-chung (???), Chang Yu-mei (???), and Lu Ming-che (???) from the opposition Kuomintang; and independent Huang Kuo-shu (???) had even proposed different versions of the tax cut extension.
On Dec. 14, Legislative Speaker You Si-kun (???) held a meeting by inviting lawmakers from various party caucuses to enter negotiations, and after which lawmakers reached a consensus to support the version approved by the Cabinet.
Finance Minister Su Jain-rong (???) has said his ministry would review the effects of the transaction tax cut from time to time and watch closely how the market would react to the extension.
Su said that in order to allow the equity market to reflect the economic fundamentals and corporate and industrial conditions, it was not appropriate to make such a tax cut permanent for now but it was necessary to set a deadline for the tax cut based on the law to protect taxpayers' interests and taxation and financial integrity.
Market analysts said local investors have long favored day trading and taken advantage of the tax cut to trade old economy stocks, in particular in the shipping industry.
Due to big swings through active day trading, the Financial Supervisory Commission, Taiwan's top financial regulator, has tightened its monitoring of the movements of large-cap shipping stocks in order to protect investors.
Analysts said that after the approval by the Legislative Yuan for a tax cut extension, the Taiex, the weighted index on the Taiwan Stock Exchange, reacted positively, soaring more than 100 points Tuesday morning despite volatility on the United States markets overnight.
Source: Focus Taiwan News Channel