The government’s tax reform committee yesterday suggested lowering the tax on purchases of foreign securities through brokerages from 5 percent to 2 percent to avoid double taxation.
The proposal, which requires legislative approval, would cut the business tax to 2 percent for purchases of foreign securities by investors regardless of whether they are individuals or brokerage firms, Sheu Yu-jer (�?�), head of the Ministry of Finance’s taxation agency, told reporters last night.
The government already imposes a 2 percent business tax on the purchase of securities at domestic brokerages, but tacks on a 5 percent business tax if the transaction involves foreign securities. The tax stands at 5 percent for all profit-making sectors, and at 2 percent for the financial industry until 2011, with the revenues set aside to bail out troubled financial firms.
“The committee agreed with the need to avoid double taxation to make the nation’s tax code more competitive internationally,” Sheu said.
The committee also agreed with a proposal to extend a tax exemption for all companies involved in making goods that are exported, Sheu said.
Only companies in the science parks currently enjoy this tax incentive, but the committee recommended including processors, warehouses, logistics companies and other firms.
Sheu said the proposed change would not affect tax revenues because the firms that would benefit are already allowed to claim a tax refund on exports. The loss of this would balance the tax cut, Sheu said.
“The proposed reform can serve both to encourage exports and streamline tax work,” Sheu said.
But the committee failed to reach a conclusion on whether to cut levies for special businesses, including ballrooms, dance halls, bars and venues with female escorts. Business tax for these establishments are 15 percent, with the exception of venues with female escorts, which are taxed at 25 percent.
Sheu said more analysis was necessary before making a decision.
Earlier in the day, Minister of Finance Lee Sush-der (李述德) said he was receptive to the proposed tax cut as most venues involved in the sector failed to keep accurate records or were underground, making it difficult to collect the levy.
A tax cut could change that, Lee said.
In related news, revenue from the vehicle license tax is expected to contract this year as the number of cars and motorcycles on the roads declines amid the recession, in spite of tax cuts to boost vehicle sales, tax officials said yesterday.
Hsieh Sung-fang (謝松芳), director of Taipei’s revenue service, said the government had expected to collect NT$50.06 billion (US$1.47 billion) in vehicle license tax this year, but that the number of cars and motorcycles stood at 5.81 million this year, down from 5.93 million last year, when revenue from the tax was NT$50.61 billion.
Vehicle owners are obligated to pay vehicle license tax this month.