The government may consider trimming corporate income tax by 5 percentage points to help the country better compete with Hong Kong and Singapore as a regional financial center, according to the Tax Reform Committee, which will reach a conclusion on the issue next month.
Vice Premier Paul Chiu (邱正雄), who heads the committee, said some panelists had suggested lowering the levy from 25 percent to 20 percent, while others advised capping the rate at 17 percent.
“If the tax is cut to 20 percent, members have suggested that there should be a subsidy,” Chiu told reporters after emerging from the three-hour meeting. “There should be no subsidy if the rate is lowered to 17 percent.”
Chiu’s remarks were in line with a statement by Vice President Vincent Siew (蕭萬長), who said on Tuesday that the nation’s tax environment would decide its future as a financial hub in the Asia-Pacific region.
The business community has urged the government to slash corporate taxes to prevent industrial migration and attract foreign capital.
Chiu said corporate income tax was 16.5 percent in Hong Kong, while Singapore applies a floating rate depending on fiscal conditions, with 18 percent this year.
The vice premier declined to comment on the impact of cutting corporate taxes on state coffers, saying only that the task force would reach a decision next month.
Industry leaders have pressed the government to lower the tax to 17 percent. Chen Wu-hsiung (陳武雄), chairman of the Taipei-based Chinese National Federation of Industries (CNFI, 全國工業總會) and a member of the advisory committee, said a corporate income tax of 20 percent was acceptable but not satisfactory.
The federation has also called for lower inheritance taxes — currently capped at 50 percent — as Hong Kong has abolished the levy and Singapore will follow suit this year.
Chiu said lowering the tax would benefit the middle class, which contributes more in inheritance tax than other groups.
The wealthy rarely pay the tax, but rather transfer assets prior to a person’s passing away, statistics indicate.
Corporations favor an inheritance tax of less than 10 percent, but the committee has put the issue on the back-burner for fear of riling fair taxation advocates.
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