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Corporation tax reduction on hold

Deputy Minister of Finance Chang Sheng-ford (張盛和) said yesterday that a government proposal to cut the corporation tax rate to less than 16.5 percent would be imposed only after the Statute for Upgrading Industries (促進產業升級條例) expires.

Chang's comments came after Ho Mei-yueh (何美玥), chairwoman of the Council for Economic Planning and Development, said on Tuesday that the council was considering a proposal to cut the tax rate from 25 percent to a level that is lower than Hong Kong's 16.5 percent.

Ho said such a significant reduction in the corporation tax rate would help improve the nation's business environment.

Chang said the finance ministry and the council had discussed the tax cut last month and reached a consensus that the lower rate would only be implemented after the statute expires in 2009.

On Tuesday, Ho said the tax reduction plan was part of taxation reforms set to be launched by the government this year, with the goal of decreasing tax liabilities and simplifying administration to create a more favorable business environment.

Ho said the council intends to make the new tax rate applicable to all businesses, bringing an end to the prevailing complicated taxation system, in which the variety of tax waivers available as investment incentives are confusing businesses.

The plan received wide-ranging support when it was raised for discussion during a meeting with business leaders earlier the same day. Ho said the Cabinet will draft a law based on the proposal and send it to a taxation reform committee for review.

The Cabinet hopes the bill will be passed by the Legislative Yuan by the end of 2009, she said.

Meanwhile, responding to a proposal by the business sector to scrap the commodity tax, Ho said that if the tax was to be abolished, the government would have to impose new taxes elsewhere to make up for the loss of revenue.

The commission is considering levying an energy tax instead, but now is not the right time to discuss the issue in light of the recent increases in energy prices, Ho said.
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