Corning May Move New Plant From Taiwan To Korea

by Mary Swire, Tax-News.com, Hong Kong

30 August 2005

After Taiwan's government launched a plan to impose a 10% Alternative Minimum Tax on corporate income, Corning Inc has threatened to move a proposed third glass substrate plant originally planned for Taiwan to South Korea.

Corning has been planning a US$500m third plant in Taiwan to ensure substrate supplies to Taiwan's makers of thin-film-transistor liquid crystal display (TFT-LCD) panels. The company says that if the government does not honour its original pledge on tax incentives when it launches the AMT, then the plant may be built in South Korea instead.

American Chamber of Commerce officials will put the case before Vice Premier Wu Rong-i this week.

Earlier in the month, Taiwan's Ministry of Finance agreed to the AMT plan that will introduce a minimum rate of tax for both corporations and wealthy individuals. The draft statute was approved by the Ministry of Finance on July 7, and will take precedence over the existing income tax law, statute for industrial upgrading, and the tax-exemption stipulations of other laws.

In the last few days, a senior cabinet official has been quoted as saying that the administration is inclined to introduce a 10 pct AMT on corporate income in one stage, rather than phasing in such a regime over three years, probably in deference to parliamentary lawmakers.

The finance ministry had previously said that some existing tax incentives would be permitted to remain in place, although this apparently contradicts the draft statute. Offshore income is also to be excluded from the AMT.

According to Finance Minister Lin Chuan, a 10% minimum corporate tax rate would raise some NT$10 billion (US$320.7 million) in additional revenues. He also stressed recently that the rate would still be much lower than Taiwan's economic rivals in the region, and only "a few hundred" firms would be expected to pay the tax.

Korea has also moved recently to tighten up on corporate taxation in a bid to counter loss of tax revenues arising from international tax planning.

According to reports in the Korean media, the tax service has indicated that it will bolster its foreign business investigation unit by employing an additional 30 auditors from September. These auditors will focus on businesses that are wholly foreign owned, or have a foreign shareholding which exceeds 50 percent.

"The nature of business is becoming more global, making it necessary for the government to make changes as well," said Kim Young-geun, an audit planning director at the tax office. An official revealed that the NTS has conducted a transfer pricing review on the May tax payments of the 345 foreign companies operating in Korea whose annual sales are at least 50 billion won ($48.5 million), although the tax department has denied the reports.

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