08.30.2001
Banks to benefit from land value tax cut

• Development: Executive Yuan passed a bill to deduct 50% of land value increment tax for the next 2 years. The resulting NT$50bn (est.) in tax revenue loss will be compensated through Gov’t bond issues providing debt law is revised. Banks will be prime beneficiary as tax will be relaxed through disposal of land and property collateral.

• Analysis: If bill is passed by Legislative Yuan, banks with longer history will likely see greater benefit as land collateral was acquired in past and tax burden is higher. Basic-level financial institutions will also benefit owing to large farmland holdings.

• Primasia View: We believe the effectiveness of the tax cut depends on property market performance. Current NPL situation will improve slightly if property market downturn persists.