Sat, Apr 15, 2017 - Page 11 News List

Ministry releases results of study on tax changes

CAPITAL OUTFLOWS:The Ministry of Finance said that regulations need to change due to the convenient and free flow of money to markets promising better yields

By Crystal Hsu  /  Staff reporter

The Ministry of Finance yesterday unveiled the findings of a six-month study on stock dividend tax changes that aim to make the local stock market more attractive to investors at the cost of business tax hikes.

The findings listed 11 measures drawn up by academics and experts tasked with the study.

“The ministry takes the study seriously, but needs more time to weigh different options before presenting a revised legislation proposal to the Cabinet next month,” National Tax Administration Deputy Director-General Sung Hsiu-ling (宋秀玲) said.

Most experts support two measures that call for progressive tax rates on stock dividends with deduction rates of 10 percent or 15 percent, Sung said, citing the study.

The ministry last year commissioned a third party to conduct the study after daily turnover on the local stock markets dwindled to less than NT$70 billion (US$2.3 billion) and state coffers took a hit.

One measure proposes tax rates of 10 percent, 20 percent and 30 percent on dividend income depending on income level, with a 15 percent deduction that would be capped at NT$50,000 per year, Sung said.

Another measure calls for taxes on dividends in line with current income taxes of up to 45 percent and a 10 percent deduction without a ceiling, she said.

The former plan would decrease government revenue by more than NT$10 billion per year, while the latter proposal suggests a business tax hike of 1 percent or 2 percent to offset any tax losses, she said.

Both measures are more complicated than existing rules, which impose a 17 percent tax on corporate income and a 5 percent to 45 percent tax on personal income.

The ministry would place more importance on simplicity without ignoring a more equitable distribution of wealth when drawing revisions, Sung said.

All measures keep the tax rate unchanged at 20 percent for non-resident shareholders, she added.

The high tax rates on the nation’s high-income earners have caused complaints and encourage tax evasion, analysts have said.

“The ministry has sensed a need for change in light of free and convenient capital flows to global markets that promise better yields and lower costs,” Sung said.

The study is to be refined by the end of this month by factoring in the principles of simplicity, efficiency, fairness and the nation’s financial health, she added.

Minister of Finance Sheu Yu-jer (許虞哲) in January said the ministry would drop the principle of keeping overall tax revenue neutral, as tax losses appear necessary to support the economy.

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