Sat, Feb 19, 2005 - Page 10 News List

Premier calls for `minimum tax system'

FINANCIAL SQUEEZE In a bid to expand the nation's tax base, the premier yesterday endorsed a policy that would set a minimum tax level for local and foreign companies


Premier Frank Hsieh (謝長廷) yesterday vowed to push forward a new "minimum tax system," which the finance ministry is currently studying.

"[We will] push forward a new minimum tax scheme to expand the nation's tax base so as to address the government's financial difficulties," Hsieh told the nation's six major business groups during a breakfast meeting yesterday morning.

On Thursday, one day before the premier's endorsement, the finance ministry's taxation administration proposed three plans to push for a new "minimum tax system" to reform Taiwan's business income tax, local media reported yesterday.

The three plans suggest that the government levy minimum business income taxes on both local and foreign enterprises doing business in Taiwan.

They suggest that the minimum tax rate to be set at 5, 10 or 12 percent of income, depending on which complementary measures are adopted in the future.

In an effort to boost domestic investment, the government has offered various preferential treatments for businesses. Under these tax policies, some companies have even been able to waive all taxes.

The finance ministry said it was only fair to levy a minimum amount of tax on companies that enjoy the preferential treatment.

According to some finance officials, after the new tax measure is implemented, the government would likely increase its tax revenues by as much as NT$20 billion (US$634 million) per year if the tax rate is set at 10 percent.

This would relieve much of the government's financial difficulties.

"The proposed minimum tax system faces many obstacles," finance officials said. "We will hold public hearings to thoroughly discuss related issues with the industry very soon."

They also said that foreign companies' Taiwanese subsidiaries would also be included under the new measure.

"Since these subsidiaries were officially formed by their parent companies in Taiwan in accordance with our laws, they are legally Taiwanese companies and should also pay taxes," the officials said.

"It is reasonable to request them to pay minimum taxes to cover various social costs," they said, adding that the relatively low tax ratio is unlike to affect their willingness to invest.

However, some experts predict that the new system will affect businesspeople's willingness to invest in Taiwan, especially foreign investors.

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