Chinese Nationalist Party (KMT) Legislator-at-large William Tseng (曾銘宗) yesterday urged the government to include tackling the nation’s underground economy in ongoing studies on tax reform.
Speaking at a forum in Taipei, Tseng said that the government must improve efforts to promote electronic payments, as the largely cash-based underground economy costs the nation about NT$100 billion (US$3.32 billion) in uncollected tax revenue every year.
Increasing the adoption of electronic payments should be included among other priorities of tax reform, such as addressing the gap between the tax obligation terms of domestic and foreign companies and between corporations and individuals, he said.
Should electronic payments reach a critical mass of public adoption, the government would likely see tax revenue increase by NT$100 billion annually, Tseng said, adding that about 30 to 40 percent of the nation’s economy is unaccounted for.
By contrast, a tax reform proposal favored by the Ministry of Finance would result in an annual decline of NT$2 billion in tax revenue, he said.
Electronic payments represent about 60 percent of transactions in Hong Kong and Singapore and about 99 percent in Finland and Sweden, but adoption remains low in Taiwan at about 27 percent, experts have said.
Tax reform proposals lack scope, Tseng said, adding that a lack of significant changes to the tax system would do little to boost collections and the economy.
Tseng, a former Financial Supervisory Commission chairman, said that the regulator requires the assistance of the Executive Yuan to promote the use of electronic payments.
Democratic Progressive Party (DPP) Legislator-at-large Julian Kuo (郭正亮) told the forum that by taxing the nation’s religious organizations, annual tax revenue could be increased by NT$100 billion.
A further NT$20 billion to NT$30 billion in tax revenue could be collected if hospitals and cram schools were taxed as corporations, he said.
A 2012 study by National Taiwan University and National Cheng Kung University estimated the nation’s underground economy at 28.1 percent of GDP, translating to about NT$3 trillion to NT$4 trillion against the nation’s NT$15 trillion economy.
Gambling, red-light districts and other illicit businesses constitute the bulk of the nation’s underground economy, the study found, with street vendors representing only a small part of the issue.
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