The Ministry of Finance (MOF) said yesterday it was mulling over “luxury taxes” after Premier Wu Den-yih (吳敦義) said on Thursday the government didn’t rule out imposing heavier taxes on the wealthy to reduce the gap between the rich and the poor.
“To address economic development, ensure fair taxation and bridge the wealth divide, the MOF is reviewing taxes on luxury goods, property, land value and income. When a consensus on the matter is achieved, it will be promoted at an appropriate time,” the ministry said in a press statement.
The “luxury tax” refers to an additional tax imposed on luxury goods, a concept brought up in 2008 by the Tax Reform Commission — which disbanded at the end of last year — as a supplementary measure to the reduction of inheritance and gift tax rates from 50 percent to 10 percent.
However, while the inheritance tax was slashed in January last year, the ministry shelved the idea of imposing a luxury tax.
Minister of Finance Lee Sush-der (李述德) said in January that although “luxury taxes” had been considered, they would be impossible to implement as the economy was still recovering from the global financial crisis.
In yesterday’s statement, the ministry said that tax collection would increase the state coffers, balance social wealth and promote economic development. The ministry said it already has different forms of additional taxes in place for those with high incomes and strong spending power.
“We already have this mechanism of imposing higher tax rates on the rich. What we are doing now is discussing whether or not we should improve it [to bridge the wealth gap],” Deputy Minister of Finance Chang Sheng-ford (張盛和) said by telephone.
“For example, individual income taxes are imposed based on the amount of one’s income. Property tax rates are also calculated in a progressive manner,” Chang said. “What is lacking and is being studied now is a possible tax on luxury goods.”
The ministry’s data showed that in 2007, the lowest individual income tax rate — 6 percent — was applicable to about 3.87 million households, which accounted for 71.8 percent of all taxpayers.
These households only contributed 7.1 percent to total individual income tax revenues, which contrasted with 44 percent from the 50,000 wealthiest households, which made up only 0.9 percent of all taxpayers, the ministry said.
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