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Citizens give their views on tax reform

"Hiking the tax rate does not necessarily help the state coffers secure a bounty in tax revenues, but might instead undermine the nation's competitive edge."

Lin Chuan, Minister of Finance

Wrapping up their five-day discussions held over weekends last month, members of a "citizens conference" yesterday voiced their concerns about and diverse opinions on the government's proposed taxation reform in a report, which Minister of Finance Lin Chuan (林全) promised will be adopted as a reference for the state's decision-making process.

This is the first time such a conference was held to solicit public opinion about financial issues.

The 20-member group suggested that the minimum tax rate to be imposed on individuals be higher than 20 percent, while the minimum corporate tax rate be maintained at 10 percent, as proposed by the ministry.

The finance ministry has submitted its draft proposal on taxation reform to the Cabinet for approval last month, pending legislative approval in the next session, slated to start next month.

The conference argued that as corporate taxes can be used for reductions when taxpayers file their individual income tax returns under the current unified tax system, the government should impose a higher tax rate on high-income earners in the pursuit of fairness and justice.

In doing so, it will have a lesser impact on corporate earnings, boosting investors' willingness to invest in local businesses. On the other hand, it will garner higher revenues from well-heeled citizens to achieve fair taxation, the group's concluding report read.

In response, Lin said that the minimum individual-income-tax rate must be set at a level that can compete with the nation's Asian neighbors.

"Hiking the tax rate does not necessarily help the state coffers secure a bounty in tax revenues, but might instead undermine the nation's competitive edge," Lin said at the conference's closing ceremony.

As Hong Kong, Singapore and South Korea have all implemented minimum individual taxation of around 20 percent, Lin said that the ministry have decided to set a tax threshold of 20 percent on people with an annual income of NT$8 million (US$250,000) or more.

The conference also advised the government on taxing investors' capital gains on stocks and future investments under the premise that complementary measures are provided to offset the possible impact.

Lin said the same issue had already been raised in the government's finance reform conference two years ago, which concluded that imposing such taxes should be treated as a long-term policy. This was because the large number of retail stock investors made policy implementation more difficult and well-rounded complementary measures still had to be designed.

"Our stance remains unchanged but it takes a long period of time to attain this goal," Lin said.

The members also urged the ministry to tax individuals' overseas incomes, with a sunrise clause included to give the government some time to prepare itself for the new system.

Lin praised the suggestions as creative and worthwhile for reference. But as this issue involves many complex factors, the ministry cannot respond immediately, he said.

The conference was composed of 20 Taiwanese citizens without any relevant professional backgrounds and who were selected through random sampling at the end of June, according to Shih Hsin University, which was commissioned by the ministry to host the conference.
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