Business leaders yesterday voiced reservations about the government’s tax reform package, calling it a near-sighted measure to fill the state coffers, which are in need of a long-term solution to be financially healthy.
Chinese National Association of Industry and Commerce (CNAIC, 工商協進會) chairman Kenneth Lo (駱錦明) said the government should instead seek to expand the taxable base to strengthen the national treasury and cut government deficit.
“The reform plan appears to be at odds with the administration’s earlier pledge to concentrate on boosting economic growth,” Lo told reporters.
The government can better help bolster the economy by removing investment hurdles so companies can offer more jobs and make greater contributions to the state coffers, said Lo, who is also chairman of the Industrial Bank of Taiwan (台灣工銀).
Last week, the Ministry of Finance announced new tax measures on stock investors, the wealthy and financial institutions, aiming to increase tax revenue by NT$90 billion (US$297 million) a year.
Lo said the plan to raise the business tax on banks and life insurers from 2 to 5 percent would weaken his bank’s profit by between NT$60 million and NT$70 million a year and would pose an even heavier burden on its peers.
The trade group is to announce its formal opinion on the reform package after holding a meeting with Vice Minister of Finance Wu Tang-chieh (吳當傑) tomorrow and a discussion by its financial committee scheduled for next week.
“The reform package seems to fall short of providing a long-term solution to the government’s growing budget deficit and rising national debt,” Lo said.
On Monday, Moody’s Investors Service said the proposed measures would allow the government to collect additional tax revenue of between NT$80 billion and NT$85 billion a year, but would not achieve a meaningful reduction in the fiscal deficit, which stood at 2.4 percent of GDP last year.
CNAIC vice chairman Nelson Chang (張安平) said he is not against plans to raise the marginal tax rate from 40 to 45 percent, but added that the government should do its part to prop up the nation’s finances.
“The government can make better use of tax revenue by enhancing its efficiency and cutting bureaucratic red-tape,” said Chang, who is also Chia Hsin Cement Corp’s (嘉新水泥) vice chairman.
Meanwhile, Taiwan Glass Corp (台玻) chairman Lin Por-fong (林伯豐) said the tax hike on the rich would affect many more individuals than the 9,500 estimated by the ministry, which he said suggested that “there is ample room for policymakers to improve their math.”