CHINA'S securities regulator is studying to exempt investors from paying tax on their corporate dividends to encourage long-term investments.
The China Securities Regulator Commission and the State Administration of Taxation have been discussing the matter since 2004, but no decision is expected anytime soon, Shanghai Securities News cited a commission official as saying yesterday.
On August 22, the regulator began seeking public opinion on its call to encourage listed companies to pay out more dividends to shareholders as part of efforts to boost the stock market. Since then, industry experts have suggested that the tax on corporate dividend should be abolished or reduced, which can encourage individual investors to hold their stakes for a longer term. Corporate dividend is taxed at 20 percent now.
"The cancellation of the dividend tax may save about 20 billion yuan (US$2.92 billion) in 2009," said Cai Dagui, an analyst at Ping An Securities Co. "But the capital accounts for only 1 percent of the assets in the market, and a boost to the market will be limited."
The regulator yesterday also made it easier for big shareholders in listed companies to increase their stakes. They would be allowed to raise their holdings in a firm by as much as 2 percentage points over 12 months before applying for permission from the regulator. Previously shareholders with a stake of at least 30 percent needed to apply in advance for permission to raise their stake.
The change will allow holders to boost their stakes more quickly when the price of their shares drop sharply, the newspaper said.