Speaking at a hustings for the Chinese Nationalist Party’s (KMT) presidential primary candidates, Hon Hai Group founder Terry Gou (郭台銘) pledged that, if elected, he would provide free childcare services for all children aged six and under. Instead of funding the policy from existing government budgets, Gou came up with three methods to finance the policy, one of which was a “wealth tax” on super-rich people.
Gou’s plan is to target the top 1,000 wealthiest people, who would each pay an additional tax of NT$100 million to NT$300 million (US$3.2 million to US$9.6 million) per year.
For example, the government could levy an annual tax of NT$300 million on the top 100 wealthiest people in Taiwan, NT$200 million on the next 400 and NT$100 million on the rest. By doing so, the wealth tax would, in theory, boost the government’s tax revenue by a total of NT$160 billion annually.
The problem is: How to define the top 1,000 wealthiest people — and is the plan feasible?
Many wealthy people in Taiwan and the US have expressed their willingness, through open letters or petitions, to pay a wealth tax to narrow the income gap between rich and poor people.
However, it is undeniable that some would be unwilling.
For instance, when former French president Francois Hollande launched a wealth tax in 2012, numerous wealthy people left France. Some of them even opened shell companies, which were nothing more than post office box numbers located in tax havens, such as the Cayman Islands, Samoa, Belize or the British Virgin Islands.
Furthermore, the super-rich are usually extremely adept at hiding their wealth, especially those in possession of laundered money. Therefore, using data from the National Taxation Bureau might be an unreliable way to calculate the amount of revenue that could be generated from Gou’s policy.
If the government were to impose a wealth tax on the top 1,000 wealthiest people with the highest net income before taxes in the order stated above, it would likely be extremely ineffectual, as they might not have the highest gross consolidated income.
This is because they do not have to pay tax on gains derived from securities transactions and can legally reduce their tax burden by making arrangements for bequests or real-estate transactions in advance. Furthermore, certain incomes are taxed separately, and charitable donations are tax deductible. The super-rich can afford to hire professional accountants to help them reduce their tax bills.
The difficulty successive governments have had in raising basic salary levels in Taiwan suggests that not every rich person is willing to shell out hundreds of millions every year to help the less well-off members of society raise their children.
Whoever wins the presidential election next year would be able to pass legislation to introduce a new wealth tax if they hold a majority in the legislature.
However, Article 7 of the Constitution states that “all citizens of the Republic of China, irrespective of sex, religion, race, class, or party affiliation, shall be equal before the law.”
An amendment to the law at a constitutional level would be difficult, requiring a proposal to be submitted by one-fourth of the legislature and any subsequent resolution to be passed by three-fourths of the legislators present at the vote, from a quorum of at least three-fourths of the total number of legislators.
Clearly, it would be difficult to institute a wealth tax, both in theory and in practice. Despite that, Gou’s policy — which is nothing more than a campaign trick — will likely be supported by voters.
Jeffery Lin is a health and safety consultant.
Translated by Eddy Chang
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