Compromise reached on business income tax levy

Delegates at an economic preparatory meeting yesterday reached a compromise, agreeing to a proposal that undistributed surplus earnings be reserved for two years before a 10 percent business income tax is levied on companies.

This is a huge adjustment from the request for a five-year grace period delegates made last Tuesday after Minister of Finance Ho Chih-chin (何志欽) voiced opposition to the longer term, citing the grave impact it would have on the state's coffers.

They had argued that a longer grace period would allow businesses more room to make taxation plans and encourage companies to step up investments.

Some business leaders have even called for the cancellation of the levy, noting that developed nations do not impose such an income tax on businesses.

Ho reiterated that the 10 percent tax is in place to make up for taxation losses incurred under the unified tax system.

The ministry's bottom line would be to extend the grace period from the current one year to two years but complementary measures are required -- such as revoking incentives for investing in automatic and pollution prevention equipment, Ho said at a recent meeting with business and industry leaders.

Business groups reiterated their opposition to the ministry's conditions yesterday, saying the issues should not be bundled together.

In other developments, the Chinese National Federation of Industries (工業總會) said yesterday that it would decide tomorrow whether to attend next week's Conference on Sustaining Taiwan's Economic Development.

Federation secretary-general Wang Ya-kang (汪雅康) said the group was considering pulling out because President Chen Shui-bian (陳水扁) said on Sunday that the Cabinet must not open up economic cross-strait policies no matter what the conference decides.