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Chip industry to lose tax-breaks

Taiwan is set to shrink the scope of tax incentives for its strategic industries, including certain items in its massive electronics industry.

Wafer foundries producing 0.18-micron or larger wafers stand to lose the current tax-break, which is reviewed every five years.

Vice Minister of Economic Affairs Yin Chi-ming (尹啟銘) said on Wednesday that the ministry will cut down the number of items in the new bylaws of the Statue for Upgrading Industries (促進產業升級條例).

The draft regulations, drawn-up by the ministry's Industry Development Bureau, contains more than 400 product items to be given tax incentives. The Council for Economic Planning and Development (CEPD, 經建會) rejected the draft bill in May, demanding a deep cut in the coverage.

The economics ministry reached a consensus with the CEPD on Wednesday to cut the tax incentive coverage by more than half.

The economics ministry believes the wafer industry has already become a basic industry rather than a technology-intensive industry.

Wafers of 0.18 micron or larger will be deleted from the five-year tax break, Yin said.

The ministry wants to encourage investment in sectors that require higher levels of technology.

An industrial association representing companies operating in Taiwan's science-based industrial parks filed a petition to the economics ministry, the CEPD and the Ministry of Finance demanding that the tax breaks be maintained.

The petition cited similar tax breaks being introduced in other Asian countries, including China and Singapore.

Taiwan currently has 30 wafer foundries, most of which are located in the Hsinchu Science-based Industrial Park.

The wafer industry netted more than NT$360.8 billion in revenue last year, more than 55 percent of total revenue of Taiwanese industrial parks.

Finance ministry officials, meanwhile, said only a small number of industries will be given tax breaks in the future, including bio-technology and passenger aircraft industries.
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