A Study on the Taxation Issues on Structured Instruments: Focusing on Personal Investment Revenue
Date Issued
2009
Date
2009
Author(s)
Chao, Yen-Chiang
Abstract
Referring to the individual income tax liability on personal investment revenue from the investment of structured instruments, there have been numerous debates repeatedly arisen in financial market practice from the following issue: structured notes issued by integrated securities firms, structured deposits issued by banks, investment-oriented insurance products issued by insurance corporations, principal-guaranteed funds issued by securities investment trust companies, and structured notes issued by foreign financial institutes are all deemed “structured instruments,” but the individual income tax liability on personal investment revenue from these financial products are different simply due to the difference of the issuers. Different tax treatments to the same taxation facts are obviously harmful to the equality of market competition, and that is against the principle of tax neutrality. Thus, the goal of this thesis is to figure out that if the inequitable situation mentioned above is acctually existent? The study steps of this thesis are shown below: firstly, in this thesis I try to conclude a definition of “structured instrument” in the standpoint of financial law; secondly, I would like to analyze and compare the being with the ought-to-be of the taxation of personal investment revenue frome these financial products respectively to see if the natures of these financial products and the natures of the investment revenue from these financial products are equal or not; finally, if the natures of the investment revenue from these financial products are similar, then the following question is: is there any legitimate reason for the difference of tax burden? As a conclusion, this study shows that these financial products which have been discussed above, in the standpoint of financial law, are not all “the narrow sense of structured instrument” which is“ composed of a fixed income financial instrument and non-fixed income financial instrument( derivatives);” in the standpoint of income tax law, however, these are all “the broad sense of structured instrument,” so-called in this thesis, which is“ composed of income from interest and income from property transactions.” Consequently, the personal investment revenue from these financial products shall in principle be levied the same individual income tax burden.evertheless, as regards the legitimate reasonableness of the difference in tax burden, it is considered in this thesis that it shall take account of every specific situation. Especially when tax incentives have been acknowledged as in accordance with the order of Constitution, the issue that is the difference reasonable then should depend on the legislation intend of tax incentive statutes. In other words, different tax burdens result from different issuers of financial instruments are not definitely unreasonable. Thus, in this thesis I try to analyze this quiestion, and hope the discussion of this study could have an effect on figuring out the debate on the principle of equality in tax. In the meantime, I also hope to provide some suggestions through this study for improving the unreasonable part of this issue.
Subjects
structured instrument
investment-oriented insurance product
principal-guaranteed fund
individual income tax
principle of tax neutrality
principle of equality
taxation according to ability to pay
tax incentives
tax evasion
legal loophole
SDGs
Type
thesis
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