Sun, Feb 07, 2010 page11

• Government nixes foreign company tax break plan

  • By Shih Hsiu-chuan / STAFF REPORTER
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  The government yesterday backtracked on a proposal criticized by activists for offering a multitude of tax credits for multinationals.

  An official at the Executive Yuan said on condition of anonymity that an article stating that multinational firms establishing operational headquarters in Taiwan and meeting other requirements could pay a flat business income tax of 15 percent — 5 percentage points lower than the recently adopted rate for businesses — would be deleted in a new proposal.

  “The article was sort of controversial. There were some doubts that it would only benefit big corporations, while in fact it was aimed at attracting foreign capital and enhancing the country’s competitiveness. The potential tax losses should be manageable,” he said.

  A survey gauging several Taiwan-based foreign firms’ opinion about the article, which found that the tax incentive was only one of many factors in a company’s ­decision to invest in Taiwan, was another factor behind the decision to remove the article, he said.

  “Popular sentiments of justice and fairness were the main concern of the government ... Other than that, it seemed uncertain that the measure would create the desired results as only one multinational corporation said in the survey that it would increase its investment in Taiwan,” he said.

  Premier Wu Den-yih (吳敦義) and officials from the economics sector yesterday briefed President Ma Ying-jeou (馬英九) on the new version of a draft statute on promoting innovative industries.

  The draft, designed to encourage businesses to focus on research and development and personnel training, as well as attract multinational firms to set up operational headquarters and international logistics and distribution centers in Taiwan via tax cuts, failed to clear the legislature in the last session.

  It was proposed to continue tax breaks for firms after the Statute for Industrial Upgrading (促進產業升級條例) expired last year.

  The Democratic Progressive Party and the Tax Reform Alliance, composed of several civic groups, have expressed strong opposition to the draft statute on promoting innovative industries.

  They estimated that the original statute on promoting innovative industries could cost the national treasury about NT$50 billion (US$1.56 billion) in annual tax revenues.

  The original version was proposed by the Chinese Nationalist Party (KMT) caucus and received the government’s blessing when discussed in the legislature.

  The official said the removal of the article could reduce the tax loss to NT$30 billion.

  The government said the abrogation of the statute would bring in more than NT$148 billion in extra revenue.

  The official said the extra revenue would be sufficient to offset losses from the new raft of tax breaks — NT$80.8 billion in business income tax cuts from 25 percent to 20 percent, NT$17 billion in individual income tax cuts, NT$21.6 billion in increases in some tax deductions benefiting workers and small businesses, and about NT$30 billion in the statute on promoting innovative industries.
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