Sat, Dec 24, 2005 - Page 10 News List

Go slow on tax tweaks: businesses

CAUTION With the government mulling the phase-out of some tax breaks for key industries, business leaders warned that any sudden move could hurt investments


Business leaders called on the government not to abruptly revoke tax incentives for the technology industry, warning such a move would have a negative impact on ongoing investments and decrease foreign investors' interest in Taiwan.

Theodore Huang (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (工商協進會), made the remark yesterday morning after talking with Cabinet officials during a breakfast meeting.

With the alternative minimum tax (AMT) scheduled to be implemented next month, the Ministry of Finance is mulling whether to scrap tax incentives the government has offered to so-called "emerging strategic industries," such as chipmaking, information technology and communications.

Currently, companies who are part of such industries can enjoy tax exemptions of as much as 50 percent on machines and equipment bought to produce their goods, according to the Statute for Upgrading Industries (促進產業升級條例). Also, there is no income tax on earnings from products manufactured with such machines and equipment, the statute states.

Critics of these business incentives consider the tax breaks overly generous to the industry, which has prompted the finance ministry to shrink the premium.

Instead of amending the statute, the economics ministry plans to issue an administrative decree, ordering companies to choose only one from the two available forms of tax relief. By issuing the decree, the measure will bypass legislative review and be put into practice next year along with the AMT measure.

"The sudden decision will negatively influence companies' investment plans, especially those that have committed [to invest here] because of the tax incentives," Huang said.

The government should companies more time to evaluate the impact from such changes in regulations, rather than hastily pushing it to become effective in less than 10 days, Huang said.

Prior to yesterday's breakfast meeting, Taiwan Semiconductor Manufacturing Co (台積電) chief executive Rick Tsai (蔡力行), BenQ Corp (明基) chairman Lee Kun-yao (李焜耀) and other company CEOs paid a visit to Minister of Economic Affairs Ho Mei-yueh (何美玥) on Wednesday to discuss this matter. Business representatives are scheduled to visit Minister of Finance Lin Chuan (林全) next week, according to Huang.

The two ministries agreed to fully communicate with the industries before implementing the measure, said Hu Sheng-cheng (胡勝正), commissioner of the Council for Economic Planning and Development, who also attended yesterday's meeting.

The ministries are also considering a compromise measure, Hu said. For example, if a company invests NT$1 billion (US$30 million), it can apply NT$500 million as a tax cut from purchasing equipment, and another NT$500 million for five years of tax exemption, Hu said. But the measure is still under evaluation, he added.

Besides the issue of tax incentives, Huang said that the local business community is still concerned about the AMT, which should be fixed at a single rate instead of floating within a range.

The minimum level for business income taxes is set at NT$2 million per year, with the tax rate of between 10 and 12 percent.

"The policy will create uncertainty for businesses," Huang said.

Separately, Premier Frank Hsieh (謝長廷) has in principle agreed to gradually lift the 40 percent-cap on China-bound investment by Taiwanese companies, Huang said.

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