Council for Economic Planning and Development (CEPD) Minister Kuan Chung-ming (管中閔) canceled his trip to the US yesterday as government agencies have not reached an agreement on tax reduction proposals for the “free economic pilot zones” program.
The council said Kuan decided to stay in the country to assist in negotiations between various government agencies and legislators to expedite the process for a draft bill on the pilot zones to be passed by the legislature.
In August, the Cabinet gave the go-ahead for the first stage of the pilot zones.
Based on the council’s draft plan, companies in four targeted industries — international logistics, international medical services as well as production and marketing of value-added agricultural products — will be allowed to operate first in the test zones, which would include six ports, as well as the Taoyuan Aerotropolis and the Pingtung Agricultural Biotechnology Park.
During its weekly meeting on Thursday, the Cabinet did not reach an agreement on the draft bill, prompting Premier Jiang Yi-huah (江宜樺) to request government departments to conduct further studies, Kuan said.
“There are differences of opinion within the government concerning tax reduction in the zones,” Kuan said after the Cabinet meeting, adding that it is now unlikely the Cabinet would submit the bill to the legislature by the end of this month as promised.
“The bill is almost empty without the tax reduction measures,” he said, adding that only tax reduction measures can ensure that the implementation of the pilot zones program will have an immediate impact on Taiwan’s economy.
In its draft bill , the council proposed that the government offer 10 year tax reductions to companies in the zones with new investment projects that offer job opportunities, to allow foreign employers in the zones to pay less income tax and to lift the tax on dividend income or profit earned from foreign investment if companies or individuals transfer the dividend income or profit to the zones from overseas.
These measures are expected to draw more investment into the zones and allow Taiwan to compete with other countries to attract talented people from abroad, Kuan said.
“Our income tax requires those who earn more than NT$4 million to pay 40 percent of their income as tax, which is higher than other countries,” Kuan said.
Meanwhile, government agencies have also not reached an agreement on whether to grant Chinese employees and investment the same status as other foreign countries, nor if Taiwan should open up the local service industry, according to the council.
Kuan said if objections from other agencies remain, it would decrease the pilot zones’ effectiveness in boosting the nation’s economy in the long term.