The Ministry of Economic Affairs yesterday said the proposed tax breaks for small and medium-sized enterprises (SMEs) in exchange for the businesses giving their employees salary increases would reduce the nation’s tax revenues by more than NT$46 million (US$1.51 million) a year, at least.
In order to encourage enterprises to raise employees’ wages, the government proposed allowing SMEs to claim 130 percent of the actual increase in payroll as an expense when filing their corporate income taxes, thus reducing their taxable income.
Chinese Nationalist Party (KMT) Legislator Yang Chiung-ying (楊瓊瓔) proposed that these enterprises should be able to claim 150 percent of the pay raises as expenses, while other lawmakers suggested a rate of 200 percent.
“Based on our calculation method suggested by the Ministry of Finance, the incentive to claim 130 percent of the actual pay increases as expenses would reduce annual national tax revenue by NT$46 million,” Small and Medium Enterprise Administration Director-General Yeh Yun-lung (葉雲龍) told reporters.
“If SMEs plan to claim 150 percent, then tax revenue would be reduced by NT$474 million,” Yeh said, adding that “to claim double the actual pay increases would push the tax revenue loss to NT$1.54 billion.”
The ministry is amending the Act for Development of Small and Medium-Sized Enterprises (中小企業發展條例草案) so the government can offer tax breaks to SMEs. The amended bill with different rate incentives recently passed a preliminary review by the Legislative Yuan’s Economics Committee and is pending a cross-caucus negotiation, Yeh said.
If the Legislative Yuan decides to pass the proposed incentives that would cost more than NT$50 million in tax revenues, the ministry will invite relevant government agencies to discuss plans on financing, he added.
Separately, the ministry yesterday confirmed it has postponed the review of Advanced Semiconductor Engineering Inc’s (ASE, 日月光) application for a tax reduction, after the Greater Kaohsiung District Court on Monday convicted four ASE employees of releasing untreated industrial wastewater into an irrigation stream in the area.
If the Environmental Protection Administration deems ASE has violated Article 10 of the Statute for Industrial Innovation (產業創新條例), the ministry said it would consider rejecting ASE’s application for a tax reduction.
Under this regulation, a company is entitled to a 15 percent deduction of its research and development spending from its business income tax payable for that year, if it has not violated any law related to environmental protection, labor, food safety or sanitation in the past three years.
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