Finance ministry to study tax proposal

The Ministry of Finance will study deferring the imposition of a business income tax on the undistributed surplus earnings of companies for at most two years from the current one year, Minister of Finance Ho Chih-chin (何志欽) said yesterday.

Ho the remarks after participants at a preparatory meeting for the Conference on Sustaining Taiwan's Economic Development on Tuesday unexpectedly proposed lengthening the grace period to five years.

"It would be highly unlikely [to allow the five-year grace period proposal]," he said.

Ho the government now collects between NT$20 billion (US$615 million) and NT$25 billion per annum from a 10 percent income tax on corporate profits derived from surplus earnings that are not distributed to shareholders.

The taxation system has been in place since 1998 when the unified tax system was adopted.

But further postponing the levy, as has been requested by business circles, would increase taxation and corporate costs, Ho said.

Furthermore, the finance ministry would have to find alternative ways to make up the budget shortfall and amend the Income Tax Law (所得稅法) if any changes to the regulation were passed at the economic conference, he said.

The five-year proposal will be placed on the agenda during a joint panel meeting tomorrow when the finance ministry will present its evaluation report, seeking to reverse Tuesday's consensus.