Local trade groups have voiced disappointment at the latest tax reform, saying that raising the corporate income tax in Taiwan makes the business environment less friendly, while governments elsewhere are easing tax burdens.
The tax hike is unreasonable, as it comes at a time when the US and Europe are cutting corporate tax burdens to attract foreign investment, Chinese National Association of Industry and Commerce (CNAIC, 工商協進會) chairman Lin Por-fong (林伯豐) said.
The legislature on Thursday approved a sweeping tax reform bill that would raise the business income tax rate from 17 percent to 20 percent, while cutting levies on retained earnings from 10 percent to 5 percent.
It also lifts tax deductions and taxable hurdles for salaried people, as well as lowering the tax cap on high-income earners from 45 percent to 40 percent, with the aim of distributing the nation’s wealth in a more equitable fashion.
“We welcome the savings on personal income taxes, but the government should follow the global trend and allow the pursuit of economic growth to guide its taxation policy,” Lin said.
For years, the tax revenue collected by the Treasury has exceeded budgetary targets, Lin said, adding that benign inflationary pressures indicate against tightening policy moves.
CNAIC expressed discontent at the remaining 5 percent tax on corporate retained earnings, saying that the levy should have been abolished as it punishes firms for setting aside capital for future expansions.
National Association of Small and Medium Enterprises (中小企業協會) chairwoman Lin Hui-ying (林慧瑛) said that the tax package was unfair, because it uses money from all companies, big and small, to ease the tax burdens of salaried people and the super rich.
The association has demanded separate income tax rates for small and medium-sized enterprises, but to no avail, she said.
“The grace period of three years for firms with modest revenues to adjust to the tax hike is not satisfactory, but it is better than nothing,” Lin Hui-ying said.
The tax reform grants firms with annual revenue of between NT$120,000 and NT$500,000 incremental increases of 1 percentage point per year over three years to better cope with the tax increase.
Lai Cheng-yi (賴正鎰), head of the General Chamber of Commerce (全國商業總會) and chairman of Shining Construction Group (鄉林集團), said the tax cuts for salaried people are aimed at raising the government’s popularity ahead of elections in November.
To gain popularity, the government has increased the tax burden of companies, a move that might dampen corporate interest to invest in Taiwan, Lai said.
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