Taiwan has gained significant headway in the ease of paying taxes, moving from 39th to 30th place worldwide, PricewaterhouseCoopers LLP’s (PwC) Paying Taxes 2017 report said.
While favorable tax terms carry heavy weight in global investment decisions, multinational corporations assign more importance to tax policy predictability, transparency and consistency, said the report, which is part of the World Bank’s Doing Business project.
“The improvement in ranking has much to do with the introduction of a new criterion — post-filing — that aims to measure the time it takes for tax authorities in different countries to process return applications,” PwC Taiwan financial services leader Richard Watanabe (吳偉臺) told a media briefing.
In developed nations, companies spend an average of eight hours to go through the process, which takes up to 27 hours in developing countries, Watanabe said.
Taiwanese authorities handle post-filings quite efficiently, as most applicants are export-oriented manufacturers that need smooth cash flows for capital equipment purchases and day-to-day operations, Watanabe said.
The study also looks at tax payments, time to comply and total tax rates in 190 economies globally, as part of the international body’s annual ease of doing business study.
The total tax rate in Taiwan has stayed unchanged at 34.5 percent this year, lower than the 36.27 percent benchmark in the Asia-Pacific region and 40.6 percent across the world, the report said.
The overall tax burden in Taiwan is heavier than Singapore’s 19.9 percent, Hong Kong’s 22.9 percent and South Korea’s 33.1 percent, but is much lighter than Japan’s 48.9 percent and China’s 68 percent, the report said.
The figures show that while taxes are an important factor, other considerations influence investment decisions by multinational corporations.
“Otherwise, tax havens like the Cayman Islands would be the world’s most attractive investment destination, while China, Japan and the US would scare away foreign investment given their heavy tax burden,” Watanabe said.
For global investors, tax policy predictability, transparency and consistency matter more than headline tax rates, PwC tax services partner Rosamund Fan (范書華) said.
The government must strike a balance between the nation’s economic development, social welfare and its fiscal health when approaching tax reforms, Fan said.
The Ministry of Finance plans to raise gift and inheritance tax rates by up to 10 percent to finance the nation’s long-term care system. The government is also seeking to overhaul the pension system for public servants, retired military personnel and school teachers in an effort to avoid a collapse of the system.
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