The deadline for filing taxes has come and gone. Many people are complaining about high taxes, apparently unaware that they are the ultimate beneficiaries of this money. The fact is that the basic tax burden in Taiwan is among the lowest in the world.
Last year, the tax rate was 11.9 percent, lower not only than that of European countries with large welfare states, but also lower than those of the US and Japan, which stood at 19.5 and 17.3 percent respectively. If you add social security contributions, the 2009 figure goes up to 18.8 percent, but it was still lower than in Japan, South Korea or the US. In the context of these figures, there must be another reason why the majority of the population believes the tax burden is excessive in Taiwan.
Payroll tax accounts almost entirely for comprehensive income tax. According to the figures for comprehensive income tax receipts for 2008, salaries and wages on average accounted for 70 percent of taxable income. This is particularly true for the 3.1 million households which have an annual income of less than NT$1 million (US$35,000) and are still liable to pay income tax. With salaries accounting for more than 76 percent of the taxable income, there is the rather strange situation in which most do indeed have a heavy tax burden.
Another reason employee tax burdens seem quite heavy is that, since it came to power, the Chinese Nationalist Party (KMT) government has introduced a string of measures to reduce non-payroll taxes. First there was the inheritance tax reform of early 2009, which replaced the progressive tax rate with a flat rate, entirely negating the Robin Hood element of the previous system and wiping NT$6.6 billion from inheritance tax revenue the year the policy was introduced.
In April last year, the government went on to reduce the corporate income tax rate from 20 percent to 17 percent — lower than the rate in China, Japan and the US — arguing that this would attract more foreign investment. The result was that direct foreign investment last the year fell 20.56 percent, with even more capital flowing into China while Taiwan bled NT$48.5 billion in tax revenue. The loss to Taiwan’s coffers was significantly higher than the NT$34.3 billion predicted by the Ministry of Finance. In addition, comprehensive income tax fell by NT$2.1 billion. It seems the ministry got its sums horribly wrong vis-a-vis encouraging both investment and salary increases.
The government has elected to reduce taxes rather than improve national infrastructure and facilities, much like a company that chooses to boost sales by slashing prices rather than focusing on product quality.
At the end of the day, that company is still going to have to think about what this means for its profit margin. If the state bears the brunt of cutting costs for companies by reducing taxes, it is going to have to increase its own expenditure on payments to manage its huge accumulated debt. It could do this by cutting social welfare commitments, such as subsidized preschool education, but this would present its own challenges as the public begins to question where its money is being spent and whether taxpayers’ dollars are going to the right place.
If the government truly wants the public to feel at ease with paying taxes, it needs to stop helping the comfortably well-off to cut costs and concentrate instead on a thorough reassessment of the past few years’ tax-cutting measures, which are damaging the nation’s finances.
Kevin Chang is research coordinator with the Taiwan Brain Trust.
Translated by Paul Cooper
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations