Luxury tax to rise, value-added to fall

Premier Frank Hsieh (謝長廷) yesterday said that value-added taxes for everyday items, medical treatment and agricultural products were likely to be lowered, and that some items in these categories would eventually be free of the tax.

However, luxury taxes would also be added to other items, he said.

Hsieh made the remarks during a TV interview aired late on Friday night.

He said President Chen Shui-bian's (陳水扁) tax reforms would "ask for more money from the rich and use that money to take care of the poor."

"Tax reform is quite complicated, so many do not understand it. We are definitely going to be increasing taxes, but we will not be increasing the burden on the poor," Hsieh said.

Hsieh said that the Ministry of Finance was still working on the details of the reforms.

"We are seeking fairer rules of the game on this issue," the premier said. "As a result, it is likely that the government will increase taxes. But the new system will in fact be more like a mechanism in which `the more you earn, the more you pay.'"

Hsieh also complained about irregularities in the current tax system. He said that for the fiscal year of 2004, the total income of the 40 wealthiest people in the nation was NT$27 billion (US$863 million).

However, of that income NT$18 billion was tax-free. In addition, eight of the 40 did not pay a single dollar in tax. Fifteen of the 40 were only charged 1 percent of their income.

"This is extremely unfair, and this is why we are reforming our tax system," Hsieh said.

In regard to the ministry's plan to lower the inheritance tax and the gift tax, Hsieh said he would suggest the eventual elimination of these two taxes.

He said that those who were wealthy enough were able to immediately wire or deposit cash in overseas bank accounts to avoid being taxed.

"This kind of thing happens every day in every country, not only Taiwan," Hsieh said.

While many countries have eliminated the inheritance tax and gift tax in the belief that they did not work, Hsieh said that the government would not do so at the moment.

"If we do that, there will be potential complaints as well. Some may complain that the government is helping the rich avoid taxes," he said. "We should take it easy and do it gradually."

Discussion of tax reform began last week, when Chen announced that the national tax burden would be increased from 13.6 percent to 15 percent over the next three fiscal years.

Former president Lee Teng-hui (李登輝) has criticized Chen's plan, saying that he was "making the tax system go from bad to worse," and that the new system would widen the gap between rich and poor.

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