Sun, Jun 11, 2017 - Page 6 News List

Low wages caused by faulty legal framework

By Lin Terng-yaw 林騰鷂

Of all the issues that prompt talented Taiwanese to leave the nation, the quest for higher wages abroad is the most problematic, National Development Council Deputy Minister Kung Ming-hsin (龔明鑫) said a few days ago.

Due to the failure to bring about successful industrial transformation over the past dozen years, businesses are still struggling to make gross annual profits of 2 percent 3 percent. Of course they cannot pay top salaries for talented people.

Premier Lin Chuan (林全) has said that it would not be possible to solve the low-wage problem in the short term.

However, these officials’ views stem from a pro-industry bias and ignore the legal system.

Article 1 of the Taxpayer Rights Protection Act (納稅者權利保護法), that was passed in December last year, stipulates that the legislation was “enacted for the purposes of implementing the protection of the existence right, work right, property right, and other relevant basic rights in the Constitution of the Republic of China, insuring rights of taxpayers, achieving tax equity, and carrying through the due process of law.”

“The expense that taxpayers pay for maintaining their basic living in accordance with human dignity for themselves and their dependents shall not be taxed,” Article 4 of the act states.

This raises the question of whether the government has given enough consideration to this law and its implementation. Low wages are not the result of failed industrial transformation alone, but the miserable consequence of a national income structure distorted by a flawed legal system.

According to the Ministry of Finance’s Department of Overall Planning, the biggest reduction to this year’s income tax revenue is the special savings and investments deduction, which is to remove NT$33.6 billion (US$1.12 billion) from the overall sum.

Receiving an interest dividend of NT$270,000 requires savings of NT$27 million, but anyone with such large savings is treated as a high-income earner. Compared with blue collar workers and knowledge workers who are only exempt from taxes if they earn less than NT$128,000 and NT$180,000 per year, respectively, this kind of tax exemption should be reviewed and amended.

Taxes on income from real estate, shares and corporate profits make up the bulk of income tax revenue, and if taxes on these items were reduced or removed altogether, that would run counter to a fair tax system.

“Tax acts or any other acts with specific policy-oriented tax incentives shall provide a definite implementation period as well as attain the reasonable policy goal as its limit and nothing more. The enactment of tax incentives in the preceding paragraph shall be conducted by holding a public hearing and submitting a tax-form expenditure evaluation,” Article 6 of the Taxpayer Rights Protection Act states.

Has the government reviewed and amended the tax acts and regulations that distort national income structure in accordance with these two articles?

Those in power of listed and over-the-counter companies only own 5 percent of their company’s shares on paper, but due to flawed corporate legislation and because corporate democracy is still lacking, they can maintain power by buying up shares using power of attorney and employing corporate profits to overcompensate board directors, auditors and top-level managers, paying them annual salaries in excess of what an ordinary person could earn in several lifetimes. The question is if the government has ever taken a proper look at the unfairness of this legal system and if it plans to do anything about it.

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