The Legislative Yuan on Friday night passed the third reading of the Industrial Innovation Act (產業創新條例), and while the new law aims to help improve Taiwan’s investment environment and increase business competitiveness, the debate over the legislation in the past few months has shown the whole country is still obsessed with the idea of tax cuts rather than industrial innovation per se. The Industrial Innovation Act is designed to replace the Act for Upgrading Industries (促進產業升級條例), which expired at the end of last year. The most noticeable clause in the new law is for the government to provide tax breaks for corporate spending on research and development (R&D).
Under Article 10, a company can deduct 15 percent of its R&D investment from its business income tax, but the amount of tax deductible should not exceed 30 percent of the firm’s business income tax for that year. This is scaled down from the original draft that said 35 percent of a business’ R&D spending would be deductible from its business income tax for five years.
The new law also stipulates that the government needs to establish a national development fund (國家發展基金) to invest in and provide loans to industries involved in green energy, agricultural technology, cultural innovation and branding development. It also enables government agencies and businesses to apply to develop and run an industrial park, as long as the establishment of the park complies with the government’s industrial policy.
What is bizarre and probably unrelated to the spirit of the legislation is that the new law’s Article 11 now offers a legal basis for the government to offer subsidies to small and medium-sized businesses for every new employee they hire.
Next week is likely to see some controversy as lawmakers are expected to vote on a draft amendment to the Income Tax Act (所得稅法) to lower the rate of business income tax as a supplementary measure to the Industrial Innovation Act.
The Cabinet and Chinese Nationalist Party (KMT) hope to cut the business income tax rate from 20 percent to 17 percent, believing this will create a more competitive investment environment at home while encouraging more companies to invest in R&D in the long term. The Democratic Progressive Party suggests a 17.5 percent proposal instead.
Be it 17 percent or 17.5 percent, those who back tax cuts usually argue that lower tax rates are necessary to promote investment and boost economic growth, believing that higher tax revenues will eventually follow. However, no one knows how long it will take to see these benefits materialize from the presumed advantages of tax cuts. More important to a sound investment environment, however, is support from other factors like a stable cross-strait relationship, policy consistency and government efficiency.
Nevertheless, during the legislation process of the Industrial Innovation Act, the debates over the size of the tax cut, a possible tax revenue shortfall and the government deficit have distracted attention from more important concerns about what strategic industries Taiwan needs in the high value-added knowledge economy era. The public is also in the dark about how the law can achieve its goal to promote industrial innovation and increase labor productivity here.
Now that the law has been passed, the challenge the government faces is how to make sure local businesses become more creative and competitive as a result of the tax breaks. The government must also be careful about the use of the proposed national development fund and prevent the establishment of new industrial parks from becoming idle or falling into the hands of land speculators. As for businesses, they need to develop a strategic perspective about their future instead of bargaining just for tax cuts.
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry