Is there equity in equity?

Cheming Yang

Taiwan is poised to repeal yet-to-be implemented capital gains tax on stock gains. A tax on some capital gains from the stock market was passed by the Legislature in mid-2013, but its implementation was later delayed to 2018 because of fears it would negatively affect turnover in the local stock market. Opponents claimed that the mere existence of the measure was scaring away investors.
The long-existing 0.3 percent transaction tax remains the main tax imposed on stock market investors in Taiwan. Amid the fear of widening income gaps, the capital gain tax in the stock market was stipulated merely two years ago aiming at enhancing social equity. Nothing has changed since. The wage level has not changed significantly and the stock market was not as vibrant as the stock markets in mainland China.
However, is the stock capital gains tax causing the problem of a not so bullish market? No doubt, capital is fluid in the era of globalization. The money can flow to other markets that investors think more profitable. The bottom line is always profit driven. So long as the net gain after tax is preferable, the money will stay. So the truth is that the stock market in Taiwan is not attractive because investors are not making more money in comparison with other markets. But investors will not make money if the publicly offered enterprises are not promising. So the key is the listed enterprises have to be competitive, otherwise no one will invest in the stock market even with zero tax.
Financial investment is a risky business around the world for sure. Some win and some lose. For those who have capital gains, their successes are the fruit of the operation of a successful market economy. As such, the winners are obliged to pay back to the society as they owe their successes to the people around them. If there is no equity in an equity market, the market itself will become the paradise of predators and the general public will only fall victims to the collective greed of investors. The energy of the government is limited. The authorities need to focus on what is best for the majority and for the future. Otherwise, income inequity will exacerbate. Should we focus more on attracting investors who are not willing to contribute to the society or on building a breeding ground for innovative and competitive enterprises? The answer is evident and the only problem is whether politicians have the courage to stick to it.


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