The Directorate-General of Budget, Accounting and Statistics earlier this month forecast that US-China trade tensions could weigh on exports this year, slowing economic growth to 2.27 percent, from 2.6 percent last year. However, more than the trade dispute, a faster cooling of China’s economy might hurt Taiwan to a greater extent than its regional neighbors, which is pushing the government to step up construction of public infrastructure, boost domestic consumption and encourage private investment.
Private investment — and the repatriation of capital by Taiwanese companies — could increase if investment barriers such as land, labor and electricity shortages were removed.
Since last year, Taiwanese businesses have increasingly opted to repatriate earnings from overseas operations due to stringent business conditions in China, and because they want to circumvent the high taxes in many countries following the implementation of the Common Reporting Standard — a framework for the global exchange of tax data.
Private investment could expand 4.31 percent this year, after growing 3.17 percent last year, if the government worked to eliminate barriers and facilitate capital repatriation, according to an Academia Sinica projection from December last year.
Capital repatriation would boost weak domestic demand more effectively than relying on the formalization of free-trade agreements with other countries, and a bill to regulate the repatriation of offshore capital is reportedly a priority in this legislative session.
At a Cabinet meeting last week, Premier Su Tseng-chang (蘇貞昌) was briefed about the planned tax benefits for companies and individuals who repatriate money, as well as the investment categories allowing for tax breaks or exemptions, local media reported. The Executive Yuan is to present the special bill to President Tsai Ing-wen (蔡英文) when it is finalized, the reports said.
Meanwhile, legal interpretations issued by the Ministry of Finance at the end of last month and remarks made by ministry officials have sought to clarify businesses’ questions about capital repatriation, especially what types of foreign-sourced income they must pay taxes on and whether they might become tax targets.
The government is eyeing how to repatriate capital to revitalize the economy, while businesses are eyeing what tax incentives might be up for grabs.
Further justifying the need for the bill is that, in the final quarter of last year, the nation’s financial account — both direct and portfolio investments — saw a net asset increase of US$17.88 billion. This was the 34th consecutive quarter of capital outflows, bringing aggregate net outflows to US$413.31 billion as of Dec. 31 last year.
One thing is for sure: The government should use a carrot-and-stick approach to regulate repatriated funds. The funds must be placed in special accounts regulated by the government at financial institutions and they need to be directed into specific industries, preventing them from flowing into the real-estate market or financing criminal activities. Controlling money laundering must continue to be a priority for the government in regulating the funds.
However, the funds could enjoy a tax break or exemption in investment categories such as the government’s “five plus two” innovative industries plan or the Forward-looking Infrastructure Development Program.
Certainly, the proposed bill and tax breaks present advantages and disadvantages, and the fairness of any tax breaks remains a concern for those who repatriated funds earlier and those who have always held their funds locally.
However, the bill does present a win-win opportunity for the government, for Taiwanese businesses and for the economy as a whole if the fund inflows can be well-regulated, and used effectively to facilitate innovation and transformation from the perspective of long-term national development.
Because much of what former US president Donald Trump says is unhinged and histrionic, it is tempting to dismiss all of it as bunk. Yet the potential future president has a populist knack for sounding alarums that resonate with the zeitgeist — for example, with growing anxiety about World War III and nuclear Armageddon. “We’re a failing nation,” Trump ranted during his US presidential debate against US Vice President Kamala Harris in one particularly meandering answer (the one that also recycled urban myths about immigrants eating cats). “And what, what’s going on here, you’re going to end up in World War
Earlier this month in Newsweek, President William Lai (賴清德) challenged the People’s Republic of China (PRC) to retake the territories lost to Russia in the 19th century rather than invade Taiwan. He stated: “If it is for the sake of territorial integrity, why doesn’t [the PRC] take back the lands occupied by Russia that were signed over in the treaty of Aigun?” This was a brilliant political move to finally state openly what many Chinese in both China and Taiwan have long been thinking about the lost territories in the Russian far east: The Russian far east should be “theirs.” Granted, Lai issued
On Tuesday, President William Lai (賴清德) met with a delegation from the Hoover Institution, a think tank based at Stanford University in California, to discuss strengthening US-Taiwan relations and enhancing peace and stability in the region. The delegation was led by James Ellis Jr, co-chair of the institution’s Taiwan in the Indo-Pacific Region project and former commander of the US Strategic Command. It also included former Australian minister for foreign affairs Marise Payne, influential US academics and other former policymakers. Think tank diplomacy is an important component of Taiwan’s efforts to maintain high-level dialogue with other nations with which it does
On Sept. 2, Elbridge Colby, former deputy assistant secretary of defense for strategy and force development, wrote an article for the Wall Street Journal called “The US and Taiwan Must Change Course” that defends his position that the US and Taiwan are not doing enough to deter the People’s Republic of China (PRC) from taking Taiwan. Colby is correct, of course: the US and Taiwan need to do a lot more or the PRC will invade Taiwan like Russia did against Ukraine. The US and Taiwan have failed to prepare properly to deter war. The blame must fall on politicians and policymakers