Calls Grow for Reduction or Exemption of Stamp Duty on Securities Transactions
There is a growing demand in the market for proposals to reduce or exempt the stamp duty on securities transactions. Recently, the Chief Executive of the Hong Kong Special Administrative Region, Lee Kar-chao, opened up public consultation for the second Policy Address of his tenure. In response, the Hong Kong Securities and Futures Professionals Association requested the cancellation of stamp duty on Hong Kong stocks. The association believes that reducing or exempting the stamp duty can lower stock market transaction costs and activate the capital market.
Several brokerage institutions have also expressed support for lowering the stamp duty on securities transactions in the A-share market. They believe that such a policy would have a significant symbolic impact and would stimulate the stock market, boosting confidence and enthusiasm in the short term.
Market analysts have pointed out that there is a necessity and room for adjusting the stamp duty on securities transactions. They argue that reducing or exempting the stamp duty would lower transaction costs and help activate the capital market. Additionally, data from the Ministry of Finance shows that stamp duty on securities transactions contributes less than 1% of national fiscal revenue on average, indicating that a reduction or exemption would have little negative impact on finances.
Analysts suggest that the stamp duty on securities transactions could be halved or canceled directly. However, they also emphasize the need to strike a balance between fiscal revenue and the capital market.
In recent months, there have been calls for tax cuts to activate the capital market and boost investor confidence. Various market players have suggested reducing the stamp duty on securities transactions as a tool that can be implemented in a timely manner. They believe that such a move would help reduce transaction costs for investors and enhance their sense of gain, positively impacting market liquidity.
Past experiences with tax rate adjustments indicate that the reduction of stamp duty would have an immediate effect on boosting market confidence and transaction activity in the short term. After the last four stamp duty cuts, the trading volume of the Shanghai Composite Index saw significant increases. Galaxy Securities Research Report attributes this to the reduction of stamp duty, which helps to lower investors’ costs and promote market transactions.
While reducing the stamp duty on securities transactions can activate the market and boost confidence, some experts caution that its long-term impact may be limited. They argue that it’s more important to introduce more incremental funds, especially medium and long-term funds, to improve the performance of listed companies and generate better returns for investors.
The appropriate range for adjusting the stamp duty on securities transactions remains a topic of debate. Data from the Ministry of Finance shows that stamp tax revenue from securities transactions accounted for approximately 1.11% of total tax revenue in the first half of 2023. While this revenue is significant, it is worth noting that fiscal revenue increased by 13.3% year-on-year, tax revenue increased by 16.5%, and stamp duty on securities transactions decreased by 30.7% year-on-year during the same period.
As discussions on reducing or exempting stamp duty on securities transactions continue, it remains to be seen how policymakers will strike a balance between providing stimulus to the capital market and addressing fiscal considerations.