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Finance minister defends tax cut plan

Minister of Finance Lee Sush-der (李述德) yesterday defended the assorted tax cuts introduced by the government in the past year, saying most tax losses would be offset by the termination of tax preferences for high-tech firms later this year.

Lee made the comment after being asked by lawmakers to clarify the matter after the Ministry of Audit demanded similar information in a letter the previous day.

This was the first time the auditing authority posted such a request, Chinese Nationalist Party (KMT) Legislator Lin Teh-fu (林德福) said.

Lee dismissed concerns over a thinning national treasury, saying funding for the tax cuts would come mostly from the expiration of the Statute for Upgrading Industries (促進產業升級條例) at the end of this year.

Once the law expires, the government is expected to collect an extra NT$140 billion (US$4.26 billion) in tax revenues annually, a sum that would help make up for the tax losses resulting from new tax cuts, the minister said.

The government has lowered the inheritance and gift levy taxes, the business income tax and car sales tax while raising deductible amounts on taxable incomes in the hope of facilitating capital repatriation as well as stimulate private consumption.

Lee said car sales increased following the tax cut and would likely not harm overall tax revenue.

KMT Legislator Sun Ta-chien (孫大千) said he supported the tax reforms, saying they had helped mitigate the impact of the economic downturn and provide companies an incentive to stay in Taiwan.

Sun said taxation policy plays a critical role in the country’s effort to become a regional financial hub.

If Taiwan seeks to be a regional capital-raising center, its tax system must be able to compete with its counterpart in Hong Kong or Singapore, Sun said.

The finance ministry said the tax cut on mass material imports cost state coffers NT$660 million in tax losses a year, while the tab for lowered sales levy on diesel reached NT$96 billion.

The inheritance and gift tax reform is expected to take away another NT$19.2 billion, while the five-year tax preference for the manufacturing industry is expected to cost NT$11.3 billion, the ministry said. The cut on the car sales tax is estimated to result in a shortfall of NT$10.3 billion in tax revenue. Lee said the tax reforms were designed to invigorate economic activity and to benefit everybody.
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