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Lawmakers slam exclusions from new tax proposal

Lawmakers yesterday expressed skepticism about the Ministry of Finance's Alternative Minimum Tax proposal, saying that the exclusion of individuals' overseas income and the continuation of five-year tax breaks for prospective businesses have created loopholes in the landmark taxation reform.

The ministry's revised draft proposal obtained the Cabinet's approval late last month.

Ahead of formal legislative discussion of the proposal next week, the Taiwan Solidarity Union's (TSU) legislative caucus yesterday invited Minister of Finance Lin Chuan (林全) to report on the taxation proposal. At the same time, a public hearing was held by the legislature's finance forum to discuss the drawbacks of the scheme.

TSU Legislator Kuo Lin-yung (郭林勇) said that although some people have set up companies outside Taiwan to avoid paying taxes, the ministry failed to levy taxes on overseas earning with the latest tax-reform plan, missing the ultimate aim of pursuing fair taxation.

In response, Lin said that taxing overseas income has been listed as a mid-term goal. However, as taxation of foreign income involves complex factors and requires time to draw up well-rounded measures, the ministry will address the controversial issue in the next stage of tax reforms.

Chien Hsi-chieh, convener of the pan-purple alliance, said that only by establishing a fair taxation system can a nation develop a sound financial system.

However, 15 of Taiwan's 40 richest people managed to pay tax at a rate of just 1 percent, which might lead to serious social problems and give rise to criticism that the government robs the poor to benefit the rich, he said.

TSU Legislator Lai Shin-yuan (賴幸媛) said she disapproved of the proposal's continuations of the five-year tax exemption for new businesses in accordance with the Statute for Upgrading Industries (促進產業升級條例). These companies will not be included in the new scheme's tax base. She added that this design has fallen short of the public's expectations for building an integrated tax system.

Lin Mei-hsueh (林美雪), director of the Industrial Development Bureau's industrial policy division, said the government has to keep its promises to businesses that decided to invest in Taiwan because of the five-year tax-free incentive.

Maintaining consistency in the implementation of government policies is more important than helping prospective business groups to turn a profit, she said.
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