A Study on Lock-In Effect of Capital Gains Tax for Securities in Taiwan Stock Market—An Application of DID Model ()
ABSTRACT
In this study, we applied classical linear regression model and DID model
while minimized the effects of international markets to investigate the
short-term and long-term lock-in effects following the announcement of the
capital gains tax for securities in Taiwan stock market. Capital gains tax was
reintroduced in 2013 in Taiwan, with stocks and securities being the main focus
of taxation to prioritizing capital gains tax reform to improve the tax system
and promote tax fairness. Although the government’s primary consideration is
generating tax revenue, scholars have long advocated establishing a fair tax
system. However, levying a tax on capital gains for securities would affect the
stock market, causing investors to become wary of any investments associated with
the capital gains tax. The challenge of balancing the interests of different
groups has made the capital gains tax for
securities difficult to implement. The empirical results showed the evidence
that the changes in trading volume of the Taiwan stock market exhibited
negative short-term and long-term lock-in effects caused by the capital gains
tax for securities as compared with those in Hong Kong’s stock market. The
lock-in effect on Taiwan’s stock trading volume led to a depression in Taiwan’s
capital market and reduced another key source of tax revenue for the government
(the securities transactions tax). The overall impacts of the tax appear to
have generated a loss greater than the gain.
Share and Cite:
Lo, M. (2015) A Study on Lock-In Effect of Capital Gains Tax for Securities in Taiwan Stock Market—An Application of DID Model.
Modern Economy,
6, 954-964. doi:
10.4236/me.2015.69090.