Major brokerages in Taiwan have threatened to stop issuing warrants in protest against a new tax, it emerged last week.
Brokers fear that the 25% levy on warrants by the government will exceed the typical 15% to 20% profit margins earned from their issue, Chuang Tai-ping, secretary-general of the Chinese Securities Association told Bloomberg.
In response, brokers have filed an administrative lawsuit against the government and demanded that the tax only be levied once hedging costs have been deducted.
"Many members are pretty angry about this, so if any board member initiates the proposal (about stopping warrant issuance), the possibility it will be passed is very high," Chuang revealed.
It is estimated that the brokers’ refusal to issue warrants could cost the government some NT$3 billion (US$89.5 million) per year in revenues and reduce weekly stock market turnover by NT$5.8 billion (US$168 million).
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