Taxes on share dividends may be cut to boost market
Source: Xinhua |
October 30, 2012, Tuesday
|
Print Edition
Print Edition
CHINA is considering cutting taxes on stock dividends for long-term investors in a latest move to boost the depressed capital market.
The policy will impose different tax rates on dividends distributed by listed companies to individual investors in accordance with investors' shareholding period, Shanghai Securities News reported yesterday.
Under the policy the holding period will be divided into three phases - less than one month, one month to a year, and more than one year.
Investors holding shares for less than a month will have to pay the legal rate, while those owning shares for more than a year will enjoy a favorable rate.
The move comes seven years after the government imposed half of the legal tax rate on stock dividends for individual investors in 2005.
The policy, which marks the fourth such cut this year, will help curb excessive speculation, boost investment value, and highlight blue-chip stocks which usually pay high dividends to their investors, the newspaper quoted analysts as saying.
"It will guide investors to make long-term investment in blue chip stocks which are currently undervalued," said Dong Dengxin, a financial and securities researcher at Wuhan University of Science and Technology.
The Shanghai composite index has slumped more than 15 percent since May as worries over the domestic economic slowdown and eurozone debt crisis have dampened investor confidence.
In sharp contrast, heavy speculation has led to unusually-high valuation for small-cap stocks.
The price-earnings ratio for special treatment shares, or companies that have posted two straight years of losses, has reached as much as 60 times, compared to less than 11 times for the Hushen 300 companies, which account for 60 percent of the country's total stock market value, the report said.
Shang Jian, general manager of Shenzhen-based UBS SDIC, a fund management company, said in the report that the proportion of the A shares' total market value in the country's gross domestic product has dropped under 50 percent, meaning that they are significantly undervalued.
The policy will impose different tax rates on dividends distributed by listed companies to individual investors in accordance with investors' shareholding period, Shanghai Securities News reported yesterday.
Under the policy the holding period will be divided into three phases - less than one month, one month to a year, and more than one year.
Investors holding shares for less than a month will have to pay the legal rate, while those owning shares for more than a year will enjoy a favorable rate.
The move comes seven years after the government imposed half of the legal tax rate on stock dividends for individual investors in 2005.
The policy, which marks the fourth such cut this year, will help curb excessive speculation, boost investment value, and highlight blue-chip stocks which usually pay high dividends to their investors, the newspaper quoted analysts as saying.
"It will guide investors to make long-term investment in blue chip stocks which are currently undervalued," said Dong Dengxin, a financial and securities researcher at Wuhan University of Science and Technology.
The Shanghai composite index has slumped more than 15 percent since May as worries over the domestic economic slowdown and eurozone debt crisis have dampened investor confidence.
In sharp contrast, heavy speculation has led to unusually-high valuation for small-cap stocks.
The price-earnings ratio for special treatment shares, or companies that have posted two straight years of losses, has reached as much as 60 times, compared to less than 11 times for the Hushen 300 companies, which account for 60 percent of the country's total stock market value, the report said.
Shang Jian, general manager of Shenzhen-based UBS SDIC, a fund management company, said in the report that the proportion of the A shares' total market value in the country's gross domestic product has dropped under 50 percent, meaning that they are significantly undervalued.
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