Taiwan: capital gains tax - FT.com To the barricades! Taiwan's investors are starting to fret amid signs that the government could introduce a capital-gains tax on investments. The plan emerged last week, sending the Taiex stock market index in Taipei tumbling to its heaviest one-day fall this year. Since the issue hit the headlines, the index has dropped 3.4 per cent even as the broader region, which it usually tracks, gained. Taiwan does not have CGT on investments, though not for want of trying. A proposal in 1988 by the then finance minister, Shirley Kuo, produced limit-down falls on the Taiex for 19 consecutive days and a total loss of more than a third. Ms Kuo's daughter, Christina Liu, the current Taiwanese finance minister, has not yet proposed anything. The market wobble stems from a decision by a new taskforce on fiscal soundness to prioritise such a tax. A draft plan could be proposed within a month, while a property-related equivalent could take six months. As always with tax measures, the details will matter. A limit below which the tax would not apply seems likely. The tax might also be geared towards short-term investments to encourage buy-and-hold behaviour. The biggest question is whether it would be neutral - replacing an existing 0.3 per cent transaction tax either entirely or partly - or would be used to raise revenue to help plug Taiwan's widening fiscal deficit. In 1988, the tax was intended to dampen a speculative frenzy that had made the Taipei stock market the world's third biggest measured by trading volume. This time, the recent election produced a debate about income inequality. Taxing investments could be portrayed as addressing this. And yet retail investors, who might in theory back this idea, make up about two-thirds of Taipei trading, according to Macquarie Securities. Setting a tax that all will accept will still not be straightforward task.