Ministry mulls dumping asset-transfer tax

The Ministry of Finance's financial reform committee yesterday discussed cuts in heritage and gift taxes in a bid to reduce the extraction of capital from the nation by rich Taiwanese for the purposes of tax evasion.

The proposal was initiated right after Premier Yu Shyi-kun took office in February, who back then instructed the ministry to study the possibility of cancelling both forms of tax.

At yesterday's meeting, Ho Chih-chin (何志欽), an economics professor at National Taiwan University, presented his proposal for a tax system that would require the ministry to incorporate both heritage (after death) and gift taxes (before death) into one unified "tax of personal assets."

A ceiling rate for the proposed unified tax system would be pegged at 25 percent of taxable assets, Ho suggested.

Currently, the ceiling rate for either heritage tax or gift tax is set at 50 percent each.

If personal assets are to be transferred between husbands and wives, no taxes should be levied, Ho said. His plan also proposed guidelines calling for the transfer of personal assets over NT$100 million to be taxed at 25 percent, while 20 percent tax should be payable for assets valued at between NT$70million and NT$100 million, 15 percent for assets worth NT$40 million to NT$70 million, 10 percent for assets worth NT$10 million to NT$40 million and 5 percent for assets worth less than NT$10 million.

"[The concerns over] double taxation of personal incomes and high marginal tax rates have been a reason behind cutting the heritage and gift taxes," Ho said in his proposal.

But Ho pointed out that the plan will have a negative impact on the tax revenues of local governments if both forms of taxation are reduced or terminated. With the new tax scheme, local governments may experience a shortfall of between NT$13.1 billion to NT$7 billion of tax revenues, from the NT$23.4 billion in tax revenues that they collected in 2000, Ho estimated.

PFP Legislator Christine Liu (劉憶如) who also attended yesterday's meeting, urged the ministry to first clarify the tax structure by finding out who exactly have been paying the taxes -- a suggestion echoed by several other committee members.

Liu said that it is not fair that those who don't know how to dodge taxes are actually paying more tax because many other, wealthier people have not paid a penny since they have transferred their assets to tax-free countries.

Liu said that many foreign countries have greatly lowered their taxes on personal assets, the US in particular.

Despite heated discussion over Ho's proposal at the meeting, attendees didn't reach a final conclusion.

Finance Minister Lee Yung-san (李庸三) said the proposal still needs more discussion within the ministry before they submit it to the legislature for review.