The Tax Reform Committee reached a consensus yesterday to trim the corporate income tax from the current 25 percent to 20 percent as well as retain some tax benefits for companies engaged in upgrading ventures.
The Cabinet-level task force, however, failed to arrive at a conclusion about whether to cut income taxes or scrap levies on companies’ retained earnings.
“Committee members agreed that the business income tax should be set at 20 percent” to make the nation’s investment environment more competitive on the world stage, Minister of Finance Lee Sush-der (李述德) said.
The corporate income tax is 16.5 percent in Hong Kong, while Singapore, applies a floating rate depending on fiscal conditions, has 18 percent this year.
The proposed tax cut, which still needs approval from the legislature and will cost the national treasury more than NT$80 billion (US$2.42 billion) a year, is intended as a lure to keep companies motivated after the Statute for Upgrading Industries (促進產業升級條例) expires next year.
The statute enables firms in newly emerging and strategic industries to qualify for 50 categories of tax benefits.
Lee said the committee also favored retaining tax breaks for companies that embark on research and development ventures, train professionals and set up operational or logistic units in the country.
But the minister said it would be up to the Cabinet to decide whether to abolish the tax on listed companies’ retained earnings.
The levy presently stands at 10 percent of earnings. Lee said some proposed scrapping the tax, while others argued it should be left unchanged.
The committee also failed to agree on whether to lower income taxes. Some suggested lowering the tax rate across the board by 1 percent but others insisted the income tax should remain unchanged. The Cabinet would have the final say on the issue, Lee said.