Legislator Hsu Tain-tsair "Hong Chun-pei Culture and Education Foundation" Charity Lecture

(Taiwan Business Daily News) The nation's highest unemployment rate was once Tainan City's pain. Legislator Hsu Tain-tsair spent five years making this historic city the city with the lowest unemployment rate and the highest labor participation rate for three consecutive years. Over eight years, the employed population increased by 47,000, a growth of 14.6%. Hsu Tain-tsair, who holds a doctorate in business administration from the United States, firmly believes that the first step to saving the economy is creating diverse employment opportunities.

The Hong Chun-pei Culture and Education Foundation and Taiwan Business Daily invited Legislator Hsu Tain-tsair on June 7 to speak at the Zhongshan Auditorium of the National Dr. Sun Yat-sen Memorial Hall on "Simplifying Taxation for the Benefit of the Nation and the People." Legislator Hsu shared his insights based on his years of experience and background as a legislator focused on fiscal, tax and financial development, and the audience benefited greatly.

Legislator Hsu Tain-tsair Charity Lecture: Simplifying Taxation for the Benefit of the Nation and the People

Among the new five municipalities, the one that best represents Taiwan's history and culture is Greater Tainan City. Legislator Hsu Tain-tsair listed cultural tourism and technology as the twin wings for this historic city's takeoff. He actively promoted cultural tourism of historic sites, starting first with a complete makeover of the cityscape.

Therefore he worked hard to create an investment environment and sought preferential conditions from the central government to accelerate industrial park development. Today Tainan City has become one of the four major high-tech cities, with 238 manufacturers already settled in the Tainan Technology Industrial Park, and 137 manufacturers approved in the Southern Taiwan Innovation Park, with total investment reaching 21.5 billion.

Legislator Hsu Tain-tsair also drafted reform bills for the securities transaction tax and securities transaction income tax in response to the securities income tax issue. Hsu Tain-tsair explained that over the past four years Taiwan's overall economy and environment have suffered damage, and the government's primary goal should be to rescue the economy rather than raise taxes. However, given that tax fairness and the growing wealth gap must be corrected, and with conflicting economic structures and Finance Minister Liu Yi-ru's announcement of levying a securities income tax, Taiwan's stock market fell sharply in response. At this time, pushing the securities income tax through forcefully is not appropriate in terms of timing.

But from a long-term perspective, the securities tax system indeed has room for reform. The main reason is that the current government's levy of a securities transaction tax conforms to the principle of simplified government and convenience for the people, yet it is not a good tax. Taxing capital transactions is levying a capital tax rather than taxing capital gains, causing long-term contraction of volume in the stock market. Therefore tax reform is indeed necessary. With the stock market currently disorderly and depressed, the uncertain factors created by the government itself should be removed early, and tax reform should be finalized early.

A fair securities income tax: Hsu Tain-tsair's version gains the most support from private experts

Under overall consideration, Hsu Tain-tsair stated that his version has three major points: First, authorize the Ministry of Finance to decide the date for implementing the securities income tax, ensuring full preparation and appropriate timing; Second, lower the securities transaction tax, with supporting measures for levying the securities income tax and proactive assessment; Third, adopt flexible tax rates for individuals, with the actual levied tax rate authorized to the Ministry of Finance to decide based on the economic environment at the time.

Hsu Tain-tsair stated that levying a securities income tax realizes fairness and justice; lowering the securities transaction tax revitalizes and strengthens the market; separate taxation, proactive assessment, and simplified government and convenience for the people are the greatest implementation principles. The levy of the securities income tax is intended for the soundness and long-term stability of Taiwan's capital and financial markets; while the difficulty in promoting the securities transaction tax lies in the many abuses of Taiwan's stock market, thus drifting further and further off course.

The version proposed by Hsu Tain-tsair best conforms to President Ma's three major principles of "taxation according to capacity, not worth the loss, and simplified government and convenience for the people." The ten features of his version are:

1. Securities transaction and income taxes are integrated into one, with a concise tax system. 2. In conjunction with the reinstatement of the securities income tax, lower the securities transaction tax rate to 1.5 per thousand. 3. Comprehensive levy, separate taxation, individual tax rate 0-10% (authorized to the Ministry of Finance to set in stages according to circumstances), eliminating dummy accounts. 4. Raise the securities transaction tax for foreign capital to 3.5 per thousand, avoiding fake foreign capital. 5. The securities income tax for legal persons applies the "minimum tax burden system," with the current tax rate of 10% and deduction of 2 million yuan unchanged. 6. Income from securities, futures and options transactions is not taxed. 7. For individuals, profits and losses offset within the current year and the following 3 years; for legal persons, within the current year and the following 5 years. 8. Holding stocks for three years halves the tax; five years is tax-free. 9. Tax collection is proactively assessed by the government; taxpayers may apply for review, and the public can be spared tax audits. 10. Authorize the Ministry of Finance to set its own implementation date, passing the tax law first, and levying only when the timing is ripe and socially acceptable.

Hsu Tain-tsair still proposed his own version, which has already gained affirmation from professional newspapers and stock market pundits. Taiwan's economic autonomy is shrinking, and the situation of Taiwan taking orders while foreign countries (China) produce is severe. Without a financially developed market to sustain the service, research and development, and innovation industries, Taiwan's economy will surely perish! If the secondary (circulation) market declines, Taiwan's capital market will never recover, regenerate, or grow strong! The importance of the securities income tax and securities transaction tax to Taiwan is self-evident.

Among them, the second item returns to the original legislative intent, lowering the securities transaction tax rate to 1.5 per thousand. This is first "restoring the former normal" before the securities income tax can be increased; the third item adopts a separately taxed securities income tax, with a levy of 0-10% tax rate that is still reasonable, will not cause major shareholders to sell off en masse, and can also reduce dummy accounts; the fourth item levies an additional 0.5 per thousand securities transaction tax on foreign capital, avoiding fake foreign capital, and is also reasonable; while the ninth item has the government proactively assess taxes, which will not disturb the people; the most important tenth item, levying only when the timing is ripe, is even more important amid global economic turbulence. Although this means retail investors must pay tax even on small profits, it will not drive capitalists away from Taiwan, the capital market can survive healthily and long-term, and retail investors can truly make money.

A "limited" securities income tax, but the timing of its introduction is even more important; the international situation is currently unstable, and the order of various policies cannot be mistaken. In the past the government punished the people with criminal penalties; now it uses harsh taxes. When South Korea has just achieved the "20, 50" developed-country goal, Hong Kong, China has repeatedly ranked first in global competitiveness in the IMD rankings, and Singapore uses low tax rates to attract the world's wealthy to become citizens, with the international situation now turbulent, the government does not think about how to "promote benefits" but only wants to levy more tax from the rich. How can Taiwan be competitive?

The finance minister of that era, Li Kuo-ting, chose to pursue economic development first between economic development and fair taxation, launching a series of investment incentive regulations that created the miracle of Taiwan's electronics industry, and he was honored as the "Father of Taiwan's Technology." This is the historical positioning that is extraordinary. Hsu Tain-tsair proposed a more "fair and just" version. If the Kuomintang consensus version is not overhauled by true experts, it will probably wreck the capital market. Therefore the people propose not to include it in personal consolidated income, and to lower the excessively high securities transaction tax. If the government insists on forcing it through, investors can only confront the government, and the wealth of every investor will shrink drastically!

Legislator Hsu Tain-tsair Profile

Legislator Hsu Tain-tsair holds a bachelor's and master's degree in economics from Chinese Culture University, passed the doctoral qualifying subject examination for a PhD in economics at the New School for Social Research in New York, USA, and studied in the doctoral program in business administration at Rutgers University, USA; he has served as a legislator in the 2nd, 3rd, 4th and 7th terms, the 14th and 15th Tainan City Mayor, convener of the Finance and Budget Committee of the Legislative Yuan, caucus whip of the Democratic Progressive Party in the Legislative Yuan, associate professor at Chinese Culture University, head of the banking department, founding chairman of the Taiwan Global Search and Rescue Association, founding chairman of the Taiwan Healthy Cities Alliance, and other positions; he is currently a legislator in the 8th term.

Hong Chun-pei Culture and Education Foundation 2014 Charity Lecture