Mon, Jan 10, 2011 - Page 8 News List

EDITORIAL: Tax reform comes years too late

The legislature on Friday passed an amendment to the Income Tax Act (所得稅法), abolishing — finally — the decades-old tax immunity of kindergarten, elementary and junior-high school teachers and administrators and military personnel.

Under the amendment, the nation’s 29,000 kindergarten teachers and staff members, 207,000 elementary-school and junior-high teachers and administrators and 135,000 military personnel will have to pay taxes on their income starting in 2013.

The Ministry of Finance said the change is expected to bring in NT$1 billion (US$34 million) in tax revenue for the state coffers annually.

The amendment is indeed a breakthrough in terms of tax reform because it is meant to bridge social injustice, but the reform came years too late.

The privilege was granted to these groups of people when the act was written in 1943 and amended in 1955 and 1979, during which time the teachers, school staff members and military officials were not paid as well as employees in the industrial and business sectors.

The introduction of the tax immunity was understandable at the time, but the benefit should have been abrogated when these groups enjoyed relatively higher job stability and much better pay and benefits than the general public as the nation achieved economic prosperity in the 1980s and 1990s.

However, the issue had never been resolved over the past two decades since then-minister of finance Wang Chien-shien took the initiative to draw up plans to cancel the privilege in 1980, largely because of the Chinese Nationalist Party’s (KMT) predominance in the legislature.

Against this background, it is intriguing to see pro-blue newspapers cheer over the amendment, referring to it as a major achievement of the KMT administration under President Ma Ying-jeou (馬英九) while touching very lightly on the perennial boycott of the reform by the KMT.

It is true the belated passage of the amendment deserves applause, but shouldn’t years of calculations by politicians blinded by electoral gains deserve condemnation?

Imagine how much better the government’s finances would have been if these 370,000 people had paid income tax over the past 20 years.

And let’s not forget that it is the government’s responsibility to ensure social justice, instead of creating a privileged class and remaining idle and indifferent for decades.

So yes, passage of the amendment is praiseworthy, but this still does not account for the failure of the reform to clear the legislative floor years earlier.

Whether or not the Ma administration really means to address the decades-old injustice is still questionable, particularly in the wake of the Executive Yuan’s plan to give the teachers, school staff members and military personnel extra benefits after they begin to pay income tax, including improving the salaries of military officials and lowering the number of classes the teachers have to teach, and after the reinstatement of the 18 percent preferential interest rate for retired public officials.

Ma said during his New Year address that he expects Taiwan to achieve social justice in the next 100 years. During a trip to Pingtung on Saturday, he also said the government needs to push reform step by step against all odds.

If Ma meant what he said, he should make sure the Executive Yuan withdraws the plan and reviews — or better, cancels — the preferential interest rate.

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