Taiwan’s tax reform committee yesterday agreed to consider imposing a tax on capital gains that would make the distribution of wealth more equitable.
Members of the task force also discussed allowing the Statute for Upgrading Industries (促進產業升級條例) to expire next year, but remained divided on how to use the extra tax revenue.
Vice Minister of Finance Chang Sheng-ho (張盛和) said after the meeting that the committee had agreed to include a proposal to levy capital gains tax on its next agenda as part of a revamp of the tax system. The committee headed by Vice Premier Paul Chiu (邱正雄) plans to carry out the reform within a year.
Academics have suggested that the government reinstate a tax on earnings from securities trading, as well as lowering or scrapping the securities transactions tax. Norman Yin (殷乃平), a professor in the Money and Banking Department at National Chengchi University, said the measure would make the tax system more reasonable.
The proposed tax led to the downfall of former minister of finance Shirley Kuo (郭婉容) in 1989 after the stock market tumbled for 19 consecutive days and investors cried foul.
The committee is not likely to reach a decision on the tax proposal or other reform proposals anytime soon. Minister of Finance Lee Sush-der (李述德) said the task force needed more time to weigh the pros and cons of the issues.
“It is no easy task to strike a balance between promoting social fairness and fostering economic growth,” Lee said.
The committee, which consists of government officials, academics, industry figures and activists, appeared receptive to the idea that the government not extend tax breaks to high-tech companies after the industrial promotion law expires in December next year.
National Chengchi University public finance professor Tseng Chu-wei (曾巨威), a vice convener of the committee, told the forum that in so doing the government might recover tax losses of NT$148.3 billion (US$48.46 billion) a year.
That figure would drop to NT$83.2 billion if the government canceled the tax on companies’ retained earnings, Tseng said.
Financial officials have proposed eliminating the tax, which is set at 10 percent of retained earnings, as well as paring the profit tax to 17 percent from the current 25 percent to placate industries upon the expiration of the tax breaks.
Christina Liu (劉憶如), a committee member and adviser at Daiwa Institute of Research Co, warned of greater industrial migration if the government failed to retain the industrial promotion law.
Liu said that she supported increasing welfare benefits for disadvantaged groups, but doubted the government could achieve the goal without hurting the economy.
“The reform committee should first come up with a more realistic goal,” she said.