Taxation of Structured Financial Products

• Main Authors: Lan Yueh Yin, 藍月吟
• Other Authors: David M. Chen
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/69210546381058697057

碩士 === 輔仁大學 === 金融研究所 === 94 === The increasing popularity of innovative financial transactions in recent years is primarily due to the need for risk management by businesses and financial investors alike and the development of sophisticated instruments tailored to meet such demands. By its very nature, financial innovation also presents great challenges to systems of taxation. Furthermore, the Individual Income tax system in Taiwan is based on the Territoriality Principle, and taxes on gains derived from securities transactions are “temporarily” suspended for more than 15 years. As a result, the neutrality and equity goals of the tax system are inevitably distorted and the inconsistent phenomenon of “one item one rule” is prevalent. For the same investment purpose but with different issuers and different product names, or originated from different geographical areas, the methods and rates of taxation are widely different. This inconsistency provides issuers and investors with plenty of tax avoidance opportunities by transacting offshore or choosing the low-tax alternatives. Thus, the core problems of the tax system seriously impede the competitiveness of domestic capital markets. Besides, tax laws often lag distant behind the velocity of development in innovative financial products and transactions, reflected in the wide discrepancy in related concepts and definitions This lacking in clarity has caused long-standing sense of antagonism between tax authorities and taxpayers. Resolution of these issues, at least, building consensus on an agreeable initiative, is becoming more and more urgent. Hence, this thesis is devoted to discuss the way(s) taxes on structured financial products and innovative financial transactions should be levied for the purposes of reducing the distortion to well-established goals of taxation and promoting the efficiency of capital markets in Taiwan.