Academics and government officials said yesterday that an income tax cut proposed by Vice President and presidential candidate Lien Chan (
However, the cuts may lead to an increase in value-added tax rates, which in turn would sharpen the gap between rich and poor. In addition, future tax increases would be unavoidable, they said.
According to the Ministry of Finance (
According to Lin Chuan (
At present, up to 70 percent of the government's income tax revenue comes from salaries and wage earners, Lin said. The remaining 30 percent comes through taxes on other sources, such as bank interest income and capital gains.
However, "This proposal is more for the presidential election than for an economic reason," Lin said, adding that few economic benefits to the nation's economy would result, as lower tax revenues means the government would have less with which to provide incentives for private-sector investment.
In addition, Lien's proposal avoids the challenge of lowering tax rates while expanding the tax base -- one way of correcting the structural problem of the income tax system, Lin said.
Meanwhile, the Ministry of Finance is considering a hike in the value-added sales tax to offset the tax revenue loss that would come with Lien's proposal. The increase in the salary tax write-off would lower inflows into the government's coffers by NT$7.4 billion a year, according to the ministry.
Currently, Taiwan's VAT is 5 percent. The finance ministry has the right to raise VAT to as much as 10 percent, according to Lin.
However, he said, if the VAT is raised now, there would be little room to raise it further down the road when other anticipated tax cuts put pressure on the government's balance sheet.
A better solution, Lin said, would be expanding the tax base. One idea is to change the current land tax system, whereby the government assigns values to property at valuations far less than the market value. Such a move from the "government announced price" system to a "market price" system would affect the nation's richest citizens most.
But "too many interest groups would be offended [by the change]," Lin acknowledged, and therefore would block the move.
While a hike of VAT rates may save the government from deeper budgetary deficit, the measure would create a bigger gap between rich and poor, according to Norman Yin (殷乃平), banking professor at National Chengchi University.
"The measure translates into a regressive tax (累退稅) -- a tax that takes a higher percentage of earnings from a low-income family than for a high-income family" Yin said.
See also
Editorial
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique