Social responsibility as incentive

By Chan Shun-kuei 詹順貴  / 

Tue, Dec 24, 2013 - Page 8

The popular documentary Beyond Beauty — Taiwan From Above (看見台灣) has stirred up a wave of enthusiasm about environmental conservation. Prosecutors in Changhua County and Greater Kaohsiung have challenged unscrupulous businesses that have laid hidden pipes in their factories for dumping toxic wastewater. These prosecutors are to be admired for uncovering the companies’ immoral deeds and instituting legal proceedings against them, which in some cases, led to arrests of those responsible.

However, the heads of the financial and economics ministries and departments, having failed to oversee such companies and guide them along the straight and narrow, have not stood up and called on delinquent businesses to live up to their social responsibilities by paying compensation and clearing up the pollution they have caused. Instead, they have been so brazen as to put in a good word for the companies involved. Does this negligence have something to do with the resulting corruption and graft?

Hopefully, prosecutors will examine this question as they investigate polluting factories.

Advanced Semiconductor Engineering Inc (ASE) — the company accused of illegal wastewater dumping in Greater Kaohsiung — makes NT$220 billion (US$7.36 billion) in annual revenues and is expected to make nearly NT$10 billion in profit this year. While raking in huge profits, the company has been sneakily dumping toxic wastewater, deceiving environmental protection regulators. People have been shocked to learn that ASE received more than NT$3 billion in tax subsidies over the past four years. The injustice is clear.

Over the past few years, there have been repeated instances of suicides committed by farmers, as they were threatened by land seizures or unable to sell their produce for a reasonable price, left without help.

Another disadvantaged group is the working class in Greater Taipei, whose hard work once allowed them to buy affordable houses or apartments big enough to provide safe and stable accommodation for their families. This was cased by the Urban Renewal Act (都市更新條例), which has been amended no less than eight times, each time making it more favorable to developers. These homeowners could not have imagined that developers would have the ability to define the areas that they want for urban renewal projects using this law, and take advantage of the act’s terms regarding majority consent among residents to throw them out of their homes and forcibly demolish the houses. When comparing the favors handed out to corporations like ASE with the harsh realities faced by farmers and working class people, one has to consider why there is such a huge difference in the treatment of people of different social status.

In 2005, the government amended the Land Tax Act (土地稅法), drastically reducing the land value increment tax. It was this tax cut that triggered the increase in land speculation. It has encouraged business corporations and investors to hoard and speculate on property, with little cost to themselves. Corporations still claim that Taipei property prices of NT$2.5 million per ping (3.31m2) are not very high. In 2009, the government went further by amending the Estate and Gift Tax Act (遺產及贈與稅法), with a big rate cut benefiting capitalists and allowing them to accumulate even more wealth.

Business owners have enjoyed various tax advantages, awards and subsidies, as well as long-term concessionary prices for water and electricity. These benefits were originally enabled by laws such as the Statute for Prizes, Awards and Investments (獎勵投資條例) and the Statute for Upgrading Industries (促進產業升級條例), which have since expired and been replaced by the 2010 Act for Industrial Innovation (產業創新條例). Several successive legal amendments have also been made to lower corporate taxes. Although property dealers now have to register their transactions based on the actual transaction price, it remains to be seen whether the government will start taxing property deals according to their real selling price next year as planned. What is certain is that the special tax on select goods and services, known as the luxury tax, which the government introduced in June 2011, supposedly to curb runaway speculation, has been completely ineffective.

The national zoning plan announced by the Ministry of the Interior in October shows that all of the nation’s urban planning zones added together could accommodate nearly 40 million people. There are 1.56 million empty housing units in the nation, including 329,000 vacant properties in New Taipei City (新北市) alone. The six major cities have 1.11 million empty units in total. The putative figure of 40 million people stands in stark contrast to those that appear in the population projections published by the Council for Economic Planning and Development. Taiwan’s current population is about 23.26 million and the population growth rate has been falling for years. The council’s population projections include high, medium and low variants. According to the medium variant, the total population would reach a peak of 23.656 million in 2024, after which it would start to fall. It is obvious that the population figure reflected by Taiwan’s urban plans will never be reached.

The problem is that the nation’s plutocratic style of government has long since turned land into a commodity. Politicians see reclassification and development of farmland as a way to improve local government finances and to influence local factions. That explains why, despite industrial zones all over the nation sitting idle, urban development plans are still moving forward in an unbridled manner. It also explains why 15,000 hectares of land, most of which is classified as special agricultural zones, is in the process of being reclassified for development, after which owners can be forced to sell.

Deputy Minister of the Interior Hsiao Chia-chi (蕭家淇) was formerly deputy mayor of Taichung. On Dec. 5, 2010, shortly before the city was combined with Taichung County to form Greater Taichung, Hsiao was interviewed by the Chinese-language United Daily News. He smugly informed the interviewer that Taichung City had the healthiest finances among the five big cities. He said that one of the main sources of the city’s finances was reclassification and expropriation of land, transforming tax-free agricultural land into land designated for construction and development. In addition to making some of the land available for auction, the city could also increase its income from the land value tax, the land value increment tax and the house tax. Hsiao’s comments make clear the real motivation for land reclassification and expropriation.

The previously quoted figures demonstrate the extent to which land is being eaten away, whether it is expansive tracts swallowed up by expanded urban development, or smaller areas ebbed away to build industrial zones, technology parks and village-style housing projects. At the same time, the current extent of industrial pollution shows that not only land, but the nation’s future prospects are being eaten away — especially during talks about climate change and food security.

If the Cabinet wants to clamber out of its current dismal confidence ratings, it will have to become more responsive to public opinion.

First, it will have to curb all the runaway urban plans claiming to be about construction and development, but have more to do with land speculation.

Second, it will need to help persuade businesses to focus attention on local communities and behave as members of society willing to exist and prosper alongside everyone else.

The right guidance strategy for government to adopt is to provide tax incentives and subsidies and demand that businesses fulfill their social responsibilities. Social responsibility should be a precondition for companies to recieve tax incentives and subsidies.

These conditions have long been outlined in the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies (上市上櫃公司企業社會責任實務守則). These principles could be raised to the level of an enforceable law and applied more broadly to companies in general, according to various levels of responsibility. Companies could then be subject to unscheduled annual inspections, the results of which would determine their eligibility to enjoy tax incentives and subsidies in the following year.

Chan Shun-kuei is a lawyer and chairman of the Environmental Jurists Association.

Translated by Julian Clegg