Taiwan to Delay Stock Bonus Tax Change for 3 Years
By Chad Rademan
Taipei, Aug. 9 (Bloomberg) -- Taiwan Finance Minister Shea Jia-dong said the government will delay for three years a plan to tax employee bonus shares at their market value, in a move aimed at reassuring investors and the island's technology sector.
Shea, speaking to reporters at a conference with executives from Taiwan's electronics companies, said the delay ``will reduce the impact'' of the change on companies. The government will also move ahead with plans to create regulations promoting the use of stock options as compensation, he said.
Employees of many technology companies receive free grants of stock as compensation, and such securities are now taxed at their NT$10 ($0.32) par value rather than the market value, which can be many times higher. Company executives opposed changing the system, saying any tightening of rules would raise compensation costs and potentially alienate highly trained workers.
``They finally yielded,'' said Abraham Leu, Asian semiconductor industry analyst at Prudential Securities Co. in Taipei. Though the present tax system on such stock grants is ``unfair,'' the proposed changes ``would hurt technology companies,'' he said.
The 12-week-old administration of President Chen Shui-bian has said it wants to make Taiwan's tax system, which favors the technology industry, more balanced, and it had previously identified the stock bonus system as a likely point for revision.
Stocks Rally
Though the government will move ahead with the change, the three-year delay and the introduction of stock option rules may help mitigate any damage. Taiwan's benchmark index rose 2.6 percent in late-session trading, led higher by Taiwan Semiconductor Manufacturing Co. and other electronics shares.
Today's meeting at Taipei's Howard Plaza Hotel included officials from the Ministry of Finance, the Ministry of Economic Affairs, the Securities & Futures Commission and the Council for Economic Planning and Development.
``The balance of rich and poor people is very important, and that's where votes are coming from,'' Leu said. ``So when the new government stepped up, the first thing they did'' was to suggest a tax ``on the rich guys.''
However, Taiwan's technology industry relies on the free stock grant system.
``They try to attract the best people,'' Leu said. ``The demand for technical skilled labor is so intense.'' |
