While the government has vowed to scrap a controversial article in the draft statute for promoting innovative industries (產業創新條例), pundits said the key was to offer incentives to all companies across every sector in Taiwan rather than favor big enterprises.
The controversial Article 30 included in the draft statute states that multinational corporations among the Fortune 500 top companies in the world that establish operational headquarters in Taiwan could enjoy a flat business income tax of 15 percent, instead of the 20 percent tax rate applied to other companies.
“Attracting foreign firms to set up operational headquarters here may not necessarily boost the economy or the employment market,” Norman Yin (殷乃平), a money and banking professor at National Chengchi University, said by telephone on Friday.
Some headquarters may be blank shells that do not really invest in Taiwan by operating factories or production lines, he said.
Steve Lin (林祖嘉), an economics professor at National Chengchi University, said in a commentary published on the Chinese-language Economic Daily News on Friday that tax credit is not the only option to entice foreign companies to set up headquarters here.
“It also needs to develop [Taiwan] into a more competent and freer investment environment to woo foreign companies,” Lin wrote.
Terry Gou (郭台銘), chairman of Hon Hai Precision Industry Co (鴻海精密), had earlier threatened to pull the company’s headquarters out of Taiwan if the article was killed.
Since then he has been low-key, making no comment after Minister of Economic Affairs Shih Yen-shiang (施顏祥) said on Friday he had spoken to Gou on the issue and obtained the latter’s understanding.
Hon Hai, which operates under the trade name Foxconn (富士康), is the world’s biggest electronics contract maker and Taiwan’s largest conglomerate in terms of turnover.
“In fact, scrapping Article 30 in fact doesn’t really hurt Hon Hai much,” said an economics official, who declined to be named. “It could still enjoy other tax rebates stipulated in Article 29.”
Article 29 allows companies to be exempted from paying business tax when they repatriate income from overseas management services, royalties, investment disposals and research and development (R&D).
But the anger from Acer Inc (宏碁) continues as the world’s second-largest PC maker is now considered a services-oriented company, a status that does not subject it to the same incentives enjoyed by manufacturers like Hon Hai in terms of R&D and personnel training.
“Acer is stomping its feet as it may not enjoy those R&D incentives,” the ministry official said. “It is better off with Article 30 to pay a flat tax of 15 percent.”
The ministry is now working to initiate other incentives, such as relaxation of the requirement to obtain R&D subsidies, in order to benefit services companies as a whole, the official said.
Despite the government’s attempt to scrap Article 30, whether the draft statute can clear the legislative floor during this session is still uncertain. Against this backdrop, the ministry said it was planning to host four meetings with domestic manufacturers, beginning today, in Taoyuan and then in other cities, in a bid to gain more support from the industry sector for the draft statute.
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