Taiwan's Government Discusses Business Tax Reform

by Mary Swire, Tax-News.com, London

01 November 2002

The Taipei Times reported on Thursday that the Taiwanese Ministry of Finance has begun meeting with the country's business community in order to find a mutually agreeable solution to a gap which is about to open up in government finances.

The locally-based newspaper revealed that during a finance committee meeting on Wednesday, the Ministry of Finance announced proposals to waive the 10% tax on the 'undistributed surplus earnings' of companies, which was first introduced when the unified tax system was adopted in 1998.

However, although this move is in keeping with the tax-reform consensus reached at the National Economic Conference in 2001, it will mean that tax collection figures will fall short, unless alternative measures are put in place quickly.

Speaking after Wednesday's meeting, Lin Tseng-ji, director-general of the Finance Ministry's taxation department warned that: 'If [this measure is] passed [by the legislature], the government's coffers are expected to be short by NT$14 billion in tax revenues this year.'

However, he explained that in order to address this, the authorities plan to increase the ceiling for business taxation from 25% to 30%, and to do away with some of the preferential treatment currently enjoyed by corporations in Taiwan. For example, no company would be permitted to pay less than 5% of their year's income in tax, according to Mr Lin.

'Such supporting measures will help balance the deficit,' he explained to the Taipei Times.

Recommended