President calls for review of tax-incentive system

President Chen Shui-bian (陳水扁) said yesterday that the government should establish an efficient incentive system to encourage technological innovations and upgrade the nation's overall competitiveness.

Chen made the remarks after presiding over a meeting of an economic advisory group.

"The administration should inspire industrial upgrading based on the principle of encouraging the creation of new values," Chen said, adding that by so doing, overall competitiveness can be enhanced.

Against this backdrop, Chen said, the existing tax incentive mechanism should be subject to an overall review in order to ensure that national resources are wisely and efficiently used.

"Academic institutes, government-funded research bodies and the private sector should pool their resources in technological research and development [R&D] to enhance operational efficiency," he said.

In response to criticism that the government has offered too many tax incentives for high-tech industries, Chen said the government may have to set a timeframe or conditions for ending R&D tax privileges, commonly known as "sunset clauses," to prevent abuse of tax incentives.

According to the Ministry of Finance's estimate, the government lost over NT$50 billion in tax revenues in 2002 because of tax breaks provided in the Statute for Upgrading Industries (促進產業升級條例).

Minister of Finance Lin Chuan (林全) last month said that too many tax breaks, such as preferential tax policies for the high-tech industry, have depleted the government's coffers, while some lawmakers complained that the high-tech sector -- led by Taiwan Semiconductor Manufacturing Co (台積電) and United Microelectronics Corp (聯電) -- has received so many tax-breaks that some high-earning companies often pay no taxes.