Taiwan’s financial difficulties stem from past governments’ unwillingness to raise taxes out of fear that it would lead to public complaints, and memories of spiraling bond obligations following previous efforts to match increased government spending, while the public tax burden has remained one of the world’s lowest, at just 12.8 percent.
Taxation in Taiwan is cursed by being too light and uneven. With all the policy incentives and tax breaks available, high-income earners have many avenues for evading their obligations. The tax burden thus falls on salary earners and low-income households. The progressive/regressive structure of the entire tax system is severely twisted and is in need of a complete overhaul. What is most unfortunate in all this is that the various attempts at tax reform in Taiwan have never worked as intended.
The recent tax changes have been focused on solving the government’s fiscal problems and structural changes to the tax system will likely be limited. However, the Cabinet has at least taken a step in the right direction. In the interest of future developments in society at large, it would be good if Taiwan’s tax system was given a complete overhaul to make it fairer and more reasonable.
Norman Yin is a professor of financial studies at National Chengchi University.
Translated by Drew Cameron