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Average citizens deserve tax breaks

`Taiwan has chosen the opposite tack. While "from cradle to grave" is largely in place, it is an honored courtesy extended only to the very wealthy. For millionaires, all taxes can be reduced.'

If someone gave you a gift, would you consider it his or her duty to do so? Confronted with such a situation, I believe that most would understand the social custom. But in official and business circles, the practice of gift-giving has become a mutually expected obligation. This mistaking of a gift for an obligation, an exception for a rule is being played out in the discussions about the imminent expiry of the Statute for Upgrading Industries (促進產業升級條例).

The profit-seeking enterprise income tax and consolidated income tax are obligatory taxes which business and industry must bear. Conversely, it is regulations like the early Statute for Prizes, Awards and Investments (獎勵投資條例) and the Statute for Upgrading Industries that are the exception -- with their offer of preferential tax gifts. What has passed is gone, but what is yet to come can be pursued. Thus the expiration of the Statute for Upgrading Industries in 2009 implies a return to a normal taxation system -- there will no longer be tax biases between electronics and traditional industries, or between capitalists and wage earners.

Yet the six major industry groups still consider benefits from the statute to be their legitimate right, apparently believing that an estimated NT$120 billion (US$3.7 billion) in tax revenue that the treasury is due to collect after the expiration of the statute should be returned in the form of reductions in profit-seeking enterprise income tax and consolidated income tax, as well as the abolishment of the stamp tax and the alternative minimum tax scheme. Clearly, their aim is to find another way to keep the money in their pocket.

Even more frightening is the fact that government also considers gift-giving a duty. For instance, the Ministry of Economic Affairs' amendments to a new set of laws intended to replace the Statute for Upgrading Industries ensures a continuation of taxation privileges for industry.

Council for Economic Planning and Development Chairwoman Ho Mei-yueh (何美玥) recently exceeded her position in announcing a third tax revision, claiming that the profit-seeking enterprise tax will be reduced from 25 percent to 16.5 percent to attract investment. Fortunately, Ho's intended largess has been momentarily blocked by public opinion; otherwise, the Ministry of Finance estimates the annual loss in tax revenue would be more than NT$120 billion, far greater than the bonus companies receive through the Statute for Upgrading Industries.

Yet, although the finance ministry is often critical of other agencies that use tax reduction to ingratiate themselves with businesses, it has been equally obstructive. As an academic, Minister of Finance Ho Chih-chin's (何志欽) area of specialization was estate tax. Since he assumed office, reforms to that tax have been endlessly deliberated, and Ho has not been shy about sharing his opinions with business and industry.

The latest "special offer" for business -- delivered by the finance ministry to the Cabinet -- is to lower the estate and gift taxes from 50 percent to 40 percent, and raise the tax-free bracket from NT$7.79 million to NT$11 million. Alterations to this classic wealth tax will cost hundreds of billion in annual tax revenue.

If we develop along these lines, Taiwan will become northern Europe upside down.

The social security system of northern Europe is famous for its "cradle to grave" scope and expansion of the government's guarantee of the public's right to a secure life.

Taiwan has chosen the opposite tack. While "from cradle to grave" is largely in place, it is an honored courtesy extended only to the very wealthy. For millionaires, all taxes can be reduced. Even the estate tax may follow suit. The wealthy are not only above us in this life, but the winners in the next generation have already been determined while they are still in their cradles.

The Cabinet's recent broadening of the criteria for receiving social benefits is even more ironic. The Cabinet said an estimated 45,000 more low-income individuals will be eligible for social benefits, bringing the total to nearly 250,000. However, the poor who qualify for such relief only make up 1.1 percent of the total population.

Isn't such a low rate of social support ridiculous? Yet the Ministry of the Interior has said the current threshold is the largest the finance ministry can afford.

Wealthy individuals and government agencies are pushing a cutthroat program of tax reform, leaving almost no tax untouched. If they succeed, the average citizen will have no hopes of turning the tables, and the poverty trap will drag them all down.

Empowering the average person should be the goal of tax reform. Do not let Taiwan become a cradle-to-grave heaven for the wealthy.

Lai Shin-yuan is a Taiwan Solidarity Union legislator.

Translated by Angela Hong
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