Taiwan’s Government Mulls Minimum Rate Of Corporate Tax

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

01 June 2005

The government of Taiwan is considering a package of new tax measures, including a plan to set a minimum tax rate for companies, in an attempt to widen the tax base and balance the budget by 2011, a presidential adviser revealed on Monday.

Chief among the new measures is a plan to impose a minimum level of corporate tax. At present, many Taiwanese firms pay little or no tax thanks to generous exemptions from the government to encourage investment, especially in the technology sector.

Finance Minister Lin Chuan has told lawmakers that a 10% minimum corporate tax rate would raise some NT$10 billion (US$320.7 million) in additional revenues. He also stressed 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.

However, some tax reductions and exemptions look set to be phased out, and the government is also considering putting up the rate of VAT by 1% or 2% from its present level of 5%.

The government is additionally mulling a proposal to subject unlisted stocks to the capital gains tax regime.

According to Lin, a final proposal regarding the minimum corporate tax rate will be submitted to the Executive Yuan in July, and the Legislative Yuan sometime next year.

The government is forecasting a budget deficit of NT$337.3 billion this year, up from NT$304 billion in 2004.

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