Reduced earnings from securities and automobile sales taxes
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In the past month, Taiwan's market activity has remained subdued due to lingering concerns about the US' tariff rates on Taiwanese goods. This has been reflected in various sectors, including vehicle sales and securities transactions.
The sales of imported vehicles declined by 25.6 percent year-on-year, reaching 15,914 units. The automotive sector has experienced a significant downturn, with tax revenue taking a hit amid market anticipation of potential tariff and commodity tax cuts.
The US tariffs have increased costs for Taiwanese exporters, including in the vehicle sales and securities-related sectors. While some goods like automobiles are subject to varying tariff rates, the overall 20% tariff challenge applies broadly under reciprocal tariffs. This tariff rate is notably higher than the 15% rate applied to other regional competitors like Japan and South Korea, putting Taiwan at a competitive disadvantage.
Regarding securities transactions, while the economic uncertainty, cost increases, and volatility in Taiwan’s export sectors (notably technology and manufacturing) have had indirect effects, there is no explicit data on direct impacts to securities transactions or financial markets from US trade policies. However, tech-related stock prices and component manufacturers have been affected by tariff-induced supply chain disruptions and cost pressures, which likely ripple into securities markets, influencing investor confidence and transaction volumes related to Taiwanese firms exposed to US tariffs.
Last month, securities transaction tax revenue was NT$23.9 billion, down by a double-digit percentage compared to the same period last year for the fifth consecutive month. The Ministry of Finance reported a decline in tax revenue from securities transactions and vehicle sales last month. However, early data for this month suggest a continued market recovery, with average daily trading value rising to about NT$497.8 billion, slightly exceeding the year-earlier figure.
The TAIEX rebounded 5.8 percent last month, supported by US approval of Nvidia Corp's sales of less-advanced chips to China, positive sales guidance from Taiwan Semiconductor Manufacturing Co, and US tariff agreements with Japan and other countries. This rebound in the TAIEX resulted in the highest securities transaction tax revenue in the past 11 months being recorded last month.
In a positive note, taxes collected from import levies on passenger vehicles last month fell 61.5 percent annually to NT$1.5 billion. This decrease could be due to the extended income tax filing deadline by 30 days, which was granted to ease the impact of external shocks related to US tariffs.
Overall, Taiwan's tax revenue last month surged threefold to NT$876.8 billion from a year earlier, driven mainly by deferred tax filings. Despite this surge, the economic impact of US tariffs remains a concern for Taiwanese authorities, who are actively pursuing diversification and support programs to mitigate these challenges.
Sources: 1. Taiwan News 2. Focus Taiwan 3. Reuters
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