The government should make efforts to improve bilateral cooperation with the US in the field of digital technology and advanced manufacturing after a tax cut bill was passed by the US Congress, pundits said last week.
Under the legislation, the federal corporate tax rate will fall from 35 percent to 21 percent and the maximum individual income tax rate from 39.6 percent to 37 percent, according to international news agencies.
The tax overhaul is expected to lure overseas US capital back to the US and further help improve the country’s domestic manufacturing environment, Chung-Hua Institution for Economic Research Regional Development Study Center director Liu Da-nien (劉大年) said on Thursday.
Some Taiwanese businesses might shift their investment to the US, Liu said, citing Hon Hai Precision Industry Co’s (鴻海精密) decision to invest in Wisconsin because of the incentives offered by the state.
As Taiwan is also about to launch a series of tax reforms, Liu said the nation should learn something from the US, deepen Taiwan-US tax and trade agreements to raise Taiwan’s competitiveness and take initiative in cooperation with the US in digital and advanced manufacturing industries.
After the tax reforms, the US would attract more foreign capital, National Chengchi University (NCCU) Department of Money and Banking professor Norman Yin (殷乃平) said.
Citing Hon Hai as an example, he said that capital inflows to the US would affect emerging markets, could squeeze such countries’ capital movement and result in an interest rate rise.
The effect of US tax reform on Taiwan should be limited, Academia Sinica research fellow Ray Chou (周雨田) said on Friday.
While it is expected to lure overseas capital back to the US and help further improve the domestic manufacturing environment, it is unlikely that Taiwan’s small and medium-sized enterprises would relocate to the US, Chou said yesterday.
“It takes a lot of resources for such a move. Only conglomerates are capable of doing it,” Chou said, adding that big companies like Formosa Plastics Group (台塑集團) and Hon Hai are already investing in the US regardless of the tax reform bill.
Ellen Ting (丁傳倫), a partner at KPMG in Taiwan, said that whether the US tax reform would attract more investments by Taiwanese companies would depend on the firms.
Taiwanese businesses are flexible and focused on meeting the specific needs of their customers on time, and if there were major demand from the US market, more Taiwan companies would consider setting up plants there, she said.
However, companies must also weigh issues such as labor costs, production costs and supply chains in each market, she added.
Minister of Economic Affairs Shen Jong-chin (沈榮津) said that big companies with overseas investments might need to adjust their global strategies in light of the US tax revamp.
More time is needed to gauge the impact of the US tax reform on Taiwan, as no signs of volatile capital movement have been seen in the local stock market, Financial Supervisory Commission Chairman Wellington Koo (顧立雄) said.
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