Economic and financial officials yesterday voiced reservations about a plan to establish free economic pilot zones in Kaohsiung, saying that the move would raise issues about tax fairness and entangle Taiwan in the US-China trade dispute.
A trade group last week proposed the idea to Chinese Nationalist Party (KMT) Kaohsiung Mayor Han Kuo-yu (韓國瑜), in a bid to advance his goal of attracting investors to the city, and Han liked the idea, saying that he would take it up with the public if the Democratic Progressive Party (DPP)-controlled central government sought to thwart the plan.
Minister of Finance Su Jain-rong (蘇建榮) said free economic pilot zones could not reverse the nation’s anemic GDP growth, but would draw criticism over tax fairness between the zones and other parts of Taiwan.
Photo: Huang Yao-cheng, Taipei Times
“Free economic pilot zones would create unequal treatment among firms in Taiwan and hurt the nation’s industrial development, among other concerns,” Su told a meeting of the legislature’s Finance Committee.
Ruling and opposition lawmakers invited government officials to give a special report on the proposal due to Han’s popularity and media attention. Former president Ma Ying-jeou’s (馬英九) administration in 2012 raised the idea of free economic pilot zones, but failed to push the idea through the Legislative Yuan due to the controversy involved, several DPP lawmakers said at yesterday’s committee meeting.
In the 2012 plan, Taiwanese companies were to be exempt from taxes on profits and dividend income from overseas operations if they were willing instead to invest the money in the free economic pilot zones.
Overseas companies, which operated warehouses or processed goods in the zones, were to enjoy a business tax exemption on 10 percent of the imported goods and on all exported goods for three years.
Su said that the Kaohsiung mayor should take a different approach to achieve his economic aim and instead seek to strengthen existing rules on free ports.
Free economic pilot zones can also be used by dishonest firms to launder money or dodge taxes in contravention of international laws governing fair competition, Su said.
The National Development Council voiced similar concerns, saying that Chinese firms could take shelter in Kaohsiung to avoid the heavy tariffs imposed by Washington on US-bound goods.
“Free economic pilot zones could lead manufacturers to place ‘made in Taiwan’ instead of ‘made in China’ on product labels, thus dragging Taiwan into the trade dispute,” NDC Deputy Minister Cheng Cheng-mount (鄭貞茂) said.
That is a scenario Taiwan wants to avoid, Cheng said.
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