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New tax policy will `take from the rich'

President Chen Shui-bian, center, and participants of the 2005 Youth National Affairs Conference pose for a photograph yesterday before the beginning of the conference at Yangmingshan's Sun Yat-sen Hall. PHOTO: WANG YI-SOONG, TAIPEI TIMES

Existing tax policies will be significantly adjusted in the spirit of social justice, because rich people contribute a relatively small proportion of their income, President Chen Shui-bian (陳水扁) said yesterday.

Chen yesterday attended a discussion session at the Youth National Affairs Conference, designed by the National Youth Commission to stimulate young people to take an interest in national affairs and public policy.

Being responsive to questions raised by participants about the wide gap between the rich and the poor, Chen cited recent statistics that efforts made by the government has slightly narrowed the household-income gap to 6.07 in 2003 from 6.16 in 2002 and 6.39 in 2002.

Chen said the situation in Taiwan is still better than that in other major economies, including South Korea's 6.8, the US' 10.2, Hong Kong's 17.7 and Singapore's 20.9.

"However, we have to admit that the situation remains serious. Adjusting existing tax regulations to have richer people pay more taxes is urgently necessary," Chen said.

Chen said salaried employees in Taiwan are taxed for every cent of their income, but managers running ventures are ironically treated favorably by the government.

Taking existing regulations offering incentives to special industries, such as high-tech firms in science parks, Chen said that such money-making companies pay much less in tax than those in traditional industries.

Citing the latest taxation reports, Chen said that last year, seven major firms from conventional industries were taxed NT$25 billion.

However, more than 300 firms, including many high-tech ones, were taxed NT$5.6 billion only.

"Because of poorly-designed incentive programs, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), whose sales last year exceeded NT$90 billion, was taxed only NT$1.6 billion only. Is this in accordance with the spirit of social justice and fairness?" Chen said.

Chen said that the tax reform program will aim to have richer people pay more in taxes.

In late May, Chen announced his six-point tax-reform program, which focuses on expanding the tax base, restructuring and simplifying the tax system and clamping down on tax evasion.

In early June, Chen reiterated his strong support for ideas of tax reform proposals brought up by his Economic Advisory Panel.

The panel proposed raising the average national tax rate from the current 13.6 percent to 15 percent over three years, and eventually to 18 percent.
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