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Finance minister promises support during tax reform

Minister of Finance Ho Chih-chin (何志欽) said yesterday that the government plans to overhaul the taxation system this year, including setting up support measures to help businesses cope with the expiration of the Statute for Upgrading Industries (促進產業升級條例) at the end of next year.

Ho, who assumed the post seven months ago, made the remarks during an interview with the Central New Agency (CNA).

"The fiscal balance and the expiration of the statute makes this year a great time to reform the taxation system, which has been twisted for a long time," the CNA quoted Ho as saying.

The minister claimed that the government achieved a fiscal balance last year for the first time since 1999.

But this single year balance merely referred to the net result of the government's increased tax revenues, plus the proceeds from the sale of several state assets, minus government spending -- without taking its previous borrowing into account.

Ho said in July that the government wanted to achieve fiscal balance by 2011.

The head of the Directorate General of Budget, Accounting and Statistics, Hsu Jan-yau (許璋瑤) said last week that the government saw tax revenue for last year reach NT$1.59 trillion, which was NT$125 billion more than the government budget.

The statute provides various tax breaks to stimulate investment, mostly to the strategic high-tech industry such as wafer manufacturing.

But the legislation has been criticized as being unfair because high-tech companies such as Taiwan Semiconductor Manufacturing Co (台積電) pay fewer tax dollars under the existing tax scheme.

To give incentives to industries that are in real need, direct government subsidies would be better, Ho said.

Other supporting measures for the statute would be to cancel the 10 percent tax imposed on undistributed earnings and to lower the highest marginal tax rates of business tax and income tax, Ho said, adding that these would be provide incentives for both individuals and enterprises.

"At this time, we need to inspect and discuss all problems that may occur as a result of the expiration of the statute, and help industries to weather the transition period," Ho said.

Despite the doubts expressed by many over the huge difficulty and obstacles that may occur during the taxation reform, Ho said he was optimistic about the overhaul.

"It will be difficult, but we have to carry out the reform in one go," Ho said.
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