Amendments to the Income Tax Law (所得稅法) passed the first reading in the Legislative Yuan on Monday. If they pass the second and third reading, military personnel and public school teachers will lose their tax-exempt status. Although this is an important part of the government's tax reform, it is just the first step toward more fair taxation.
Tax exemptions for military personnel and public school teachers are an anachronism. At one time, their salaries and living conditions were poor, and they were sent to far-flung, remote areas to defend the nation or teach children. Tax exemption was a reasonable way of making up for such hardships.
Today the situation has changed. There are large numbers of unemployed people, while many workers who draw monthly salaries of NT$20,000 to NT$30,000 (US$625 to US$935) have to pay tax on every single dollar they earn. By comparison, public school teachers and military personnel make NT$50,000 to NT$60,000 per month, but don't pay any tax at all.
They also enjoy generous pension packages, and their 18 percent preferential interest rate means that their pensions sometimes are as high as their salaries. This is unreasonable -- and it is hardly surprising that both public opinion and the government feel that this policy needs reforming.
Even after military and civil service personnel and public school teachers start paying income tax, the tax system still won't be equitable. The Ministry of Education and the Ministry of National Defense will direct the tax revenue from military personnel and public school teachers -- approximately NT$15.5 billion -- toward subsidies for teachers and military personnel. None of it will end up in the treasury's coffers. The Ministry of Finance has merely succeeded in expanding the tax base without increasing revenue or establishing a fair system.
Real tax equality should mean that everyone who earns money should pay tax, and those who earn more should pay more. But that is not the case, for the rich enjoy various investment tax breaks, and can afford the services of accountants who help them reduce or evade tax through various loopholes. As a result, the rich pay little or no tax, while the full burden of taxation falls on ordinary salary-earners who have to pay tax on every dollar they earn. The Ministry of Finance is aware of this inequality, and has therefore proposed minimum tax payments. This should be coordinated with various tax incentives, and the policy should be implemented as soon as possible.
The nation's income gap is smaller than that in most advanced nations, but over the last few years it has widened. It is the government's responsibility to make those who are wealthy bear a greater share of the tax burden so that the weak and disadvantaged can be properly cared for. Following the abolition of the tax-exempt status for military personnel and government teachers, further steps must be taken to make sure that rich people, financial groups and other businesses bear a more fair share of the tax burden.
When military personnel and teachers pay income tax, and businesses are required to pay a minimum tax, this will extend the tax base and conform to the principle that everyone should contribute to it. The next step is to better use existing tax brackets to make the rich carry a greater share of the tax burden, relieving the burden on low income households. In this way, through its tax policy, the government will be able to rectify the nation's income gap and look after those most in need of help.