Taiwan ruling party proposes capital gains tax, stocks rally

TAIPEI May 29 (Reuters) - Taiwan's ruling KMT Party proposed a capital gains tax plan late on Monday that favours stock investors more than a controversial earlier plan put forward by the cabinet, lifting the local stock market to a two-week intraday high on Tuesday.

In late April, the cabinet revised its plan for a capital gains tax, part of broader reforms by President Ma Ying-jeou to address a growing rich-poor gap in Taiwan, adjusting the tax rate and raising taxable thresholds for individual investors. Opposition to its proposal had sent the stock market lower on concerns investors would be driven away.

Under the latest proposal by KMT, which has a slight majority in the cabinet, investors have the choice of paying the tax when the market trades above 8,500 points or they can add their stock trading profits to their annual income, a KMT lawmaker said.

Individual investors would be required to pay 0.1 percent of their stock profit when the main index is between 8,500 and 9,499, and 0.2 percent when the index is at 9,500-10,499.

"Our version not only offers investors flexibility, but also collects more tax than the T$10 billion ($339 million) per year projected by the cabinet," said KMT legislator Lai Shyh-bao.

"The KMT plan is aimed at meeting the expectations of investors rather than those of the cabinet," said Alex Hu, a vice-president of propriety trading at state-run Mega Securities.

"The Taiwan market has traded at an average of 7,900 points over the last 10 years," meaning investors could expect to pay little by way of capital gains tax under the KMT plan, he said.

If approved, the tax will take effect next year.

Lai said the KMT Party expected its tax proposal to become law in the session ending June 15, providing there were no objections from opposition parties.

By 0438 GMT, the main TAIEX index had surged 2.8 percent to 7,335.06. (Editing by Chris Lewis)