Taiwan unveils economic plan as Ma's popularity slumps

Government to revise capital-gains tax rules and let insurers invest in infrastructure projects

PUBLISHED : Wednesday, 29 May, 2013, 12:00am
UPDATED : Wednesday, 29 May, 2013, 2:51am

Taiwan will let insurers invest in infrastructure projects and create a NT$1 billion (HK$260 million) fund to channel money to companies as President Ma Ying-jeou seeks to boost growth and revive his flagging popularity.

The island also plans to revise capital-gains tax rules, give cash incentives to trade in old cars for new ones, simplify visa procedures for mainland visitors and set aside NT$400 million to subsidise energy-saving home appliances including gas stoves and heaters, Premier Jiang Yi-huah said yesterday.

Ma, whose disapproval rating of 70 per cent this month is at its highest since he took office in May 2008, joins policymakers from Australia to South Korea in moving to aid their economies as the global recovery falters.

Taiwan's statistics bureau last week cut its forecast for gross domestic product growth this year to 2.4 per cent from 3.59 per cent.

"President Ma is under pressure to deliver some solutions after economic growth slowed in the first quarter," said Yang Tai-Shuenn, a political scientist at the Chinese Culture University. "But I don't think this would help lift his approval rating or bring real benefits to the economy."

Taiwan's benchmark stock index closed 0.21 per cent lower at 8,263.05 points yesterday. Shares in Cathay Financial Holding, which owns Cathay Life Insurance, fell 0.13 per cent.

Proposed revisions to capital-gains tax rules include removing the condition that investors be taxed when the key market index closes at 8,500 points or higher, and reducing the tax rate on investors with NT$1 billion or more in trading volume to 0.1 per cent from 2.25 per cent.

The measures await legislative approval, and might be passed in the current session, Jiang said.

"We are introducing these measures to bolster the economy as recent economic data failed to meet expectations," cabinet spokeswoman Cheng Li-wun said.

Taiwan's GDP grew 1.67 per cent in the three months to March from a year earlier, after expanding 3.97 per cent in the fourth quarter.

Ma has simplified investment procedures, reshuffled the government's top posts, resumed trade talks with the United States and sought closer ties with mainland China to revive his economic agenda.

Taiwan's exports fell last month for a second time in four months, while an index showed manufacturing activity eased last month.

Beijing and Taipei would sign a service-trade agreement in the "near future", Wang Yu-chi, the minister of Taiwan's Mainland Affairs Council, said yesterday.

The two sides have signed 18 agreements since Ma took office in 2008.

"Given that the measures are coming just days after the government's GDP downgrade and given the still-sizeable challenges ahead for Taiwan exporters, I think growth is the overriding concern right now," said Donna Kwok, an HSBC economist.