Wed, Dec 30, 2009 - Page 12 News List

Tax Reform Committee bids farewell

LOOKING AHEAD In the long run, tax hikes or cuts will not necessarily affect overall tax revenues, the finance minister said, citing 2001 to this year as an example


The Cabinet’s 18-month-old Tax Reform Committee held its last meeting yesterday before it disbands at the end of the year. Tax reforms implemented this year cut nearly NT$30 billion (US$928 million) in tax revenues.

The treasury will lose another NT28.4 billion when income rates are slashed next year, compared with the tax committee’s estimate that tax revenue would shed a net total of NT$21.2 billion next year if all proposed tax reform measures were carried out as scheduled.

“Around NT$21.6 billion in tax revenues were lost as a result of the ceiling for income tax deductions being raised, while the inheritance tax being slashed from 50 percent to 10 percent led to a shortfall of NT$7.28 billion this year,” Deputy Minister of Finance Chang Sheng-ford (張盛和) told reporters after the meeting.

But Chang said the losses were not excessive for the short-term and tax hikes had yet to be considered because of the global economic downturn.

Chang said the tax reform committee had passed a resolution yesterday for the government to push for green taxes, raise incremental land tax rates, and establish anti-treaty shopping provisions next year.

In the medium and long-term, the government will consider allowing institutional investors a choice of paying capital gains taxes on their stock investments in exchange for deducting investment losses from taxable income, Chang said.

“In the future, tax revenues will gradually increase, but this will depend on whether the government truly implements the tax reforms proposed by the tax reform committee,” he said.

Minister of Finance Lee Sush-der (李述德) said on the sidelines of the meeting that the timing was not right to raise taxes, but if the economy improves and social conditions mature, the government will “go with the flow.”

In the long run, tax hikes or cuts will not necessarily affect overall tax revenues, Lee said, saying that between 2001 and this year many tax cuts had been implemented yet tax revenues had grown 50 percent.

Vice Premier Eric Chu (朱立倫) yesterday praised the committee’s efforts to simplify tax collection procedures and improve economic efficiency. Chu is the committee’s convenor.

But Chu said there was room for improvement in expanding the tax base and realizing social fairness and justice, urging the government to redouble its efforts to discuss on tax reform with the public.

“In the medium and long term, the government should strive to communicate with the public on whether to scrap tax exemptions for military personnel and teachers and whether to levy mansion and carbon taxes,” Chu said.

Chu said that higher taxes were not a trend, but achieving social fairness and justice was.

The tax reform committee, which was established at the end of June last year, aimed to overhaul the taxation system. It led to several major tax reforms in the past one and a half, including slashing the inheritance and income taxes and raising the ceiling for income tax deductions.

Income taxes rates will drop next year and tax exemptions for military personnel and teachers are expected to be scrapped in 2011.

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