Tuesday, July 31, 2012

Taiwan may exempt foreign funds from tax

HONG KONG (MarketWatch) � A Taiwanese committee looking into whether to bring back an unpopular capital-gains tax favors exempting foreign institutional investors, a senior government official reportedly said Friday.

The committee�s consensus is against foreign institutional investors such as pension funds being include in the plan, Finance Minister Christina Liu was cited as saying Friday in local media reports.

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The tax committee is due to conclude it meetings next week and make submissions on how the government should proceed.

Taiwan had capital-gains taxes on stock investments in place for about a year before they were suspended in 1990 amid strong opposition from investors.

The government is considering the bringing back the tax as a way to help balance its budget, which has been in deficit since 2009.

Taiwan�s stock-benchmark Taiex XX:Y9999 �climbed 0.6% Friday, its first gain in four sessions, with the advance coming despite generally weak markets elsewhere in Asia. See Asia Markets.

Even with the Friday gain, Taiwan stocks were still down 3.1% for the week, as investors worried about the possible tax imposition, and analysts warned that the market could fall further as investors sell off holdings.

�The government might face a dilemma in that the [capital-gains tax] could hurt foreign investors� willingness to invest in Taiwan, contrary to the government�s desire for the country to become a regional financial center,� Macquarie analysts said in a note earlier this week.

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