The Ministry of Finance yesterday called on lawmakers to uphold recent income tax revisions that would halve tax credits for high earners, saying the privilege has failed to stimulate investment and cost the national treasury heavy losses in tax revenues over the past 14 years.
The legislature’s Finance Committee is to hold a public hearing today on whether the revisions, due to take effect next month, should be backdated, or postponed, as some legislators have suggested.
At issue are revisions in June this year to the Income Tax Act (所得稅法), which would cut tax credits by 50 percent for dividend income for individual shareholders.
Companies have paid business tax on the same earnings.
The ministry has allowed individual shareholders more tax credits in the hope that company policymakers would use retained earnings for investments to strengthen their business operations.
However, many companies kept earnings without adopting expansion plans, translating into tax losses of nearly NT$1 trillion (US$31.51 billion) over the past decade, the ministry said, adding that high earners — who are subject to an income tax of 30 percent — accounted for 51.7 percent of the dividend incomes.
The tax revisions are backdated on corporate incomes earned since 1998, with the extra tax revenues intended to finance tax credits for lower earners and disadvantaged groups from next year on, the ministry said.
Backdating is in line with international taxation practices and is important to strengthen the government’s financial health, the ministry said. It would take companies 14 years to have the retained income of NT$1.41 trillion taxed given the NT$100 billion quota per year, it said.
Several Democratic Progressive Party lawmakers suggested pushing back the income tax revisions by five years, allowing companies more time for adjustment.
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