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Businesses welcome tax cut scheme

Business groups yesterday gave the thumbs up to the Cabinet's decision to stimulate the local economy with new tax cuts.

"The Cabinet has shown great sincerity in providing tax incentives to help local businesses," Chinese National Federation of Industries (工業總會) chairman Chen Wu-hsiung (陳武雄) said, adding he felt the best package should be a combination of lower tax rates and tax rebates for research and development.

The Cabinet, led by Vice Premier Chiou I-jen (邱義仁), held tax-cut discussions with Chen and five other chairmen of local business groups, including Theodore Huang (黃茂雄) of the Chinese National Association of Industry and Commerce (工商協進會), Chang Ping-chao (張平沼) of the Chamber of Commerce (商總) and Roscher Lin (林秉彬) of the National Association of Small and Medium Enterprises (中小企業協會), late on Sunday night.

The Ministry of Finance yesterday said it had reached a consensus with leaders of six industries on replacing tax breaks for high-tech sectors with lower tax rates for all businesses.

However, since the proposal still needed the approval of the new legislature, whether the ministry would have its way remained to be seen.

The ministry favors the abolition of tax breaks outlined in the Statute for Upgrading Industries (促進產業升級條例), which would bring in an extra NT$140 billion (US$4.37 billion) a year in tax revenues.

As the ministry must take feedback from the industrial sector into consideration, another round of discussion will be held on March 3, where a final decision will be made, the ministry said.

For its part, the Ministry of Economic Affairs (MOEA) stressed the importance of retaining some tax rebates to encourage sustainable growth in industries.

"Our position is somewhat different from that of the finance ministry, even though we both want a tax framework that is fairer to all," a MOEA official requesting anonymity said.

"We will continue to negotiate for tax rebates for investments in research and development, for which companies in all sectors can apply," the official said. "Since the proposed tax reform framework has to be approved by the new parliament, we don't know whether the majority of legislators are also in favor of the plan."

Meanwhile, six business groups yesterday said they had reached a consensus with the government over the annulment of the statute.

However, they requested that the government make hefty cuts on both business income tax and personal income tax.

General Chamber of Commerce (全國商業總會) chairman Chang Ping-chao (張平沼) said that business groups all agreed that the government should cut business tax from the current 25 percent to between 17 percent and 18 percent, not the proposed 20 percent.

"With a 17.5 percent business tax, the local tax environment would be as competitive as that in Hong Kong and Singapore, which would encourage more China-based Taiwanese businesses to return home and increase the influx of foreign investment," Chang said by telephone yesterday.

If the 7 percent tax cut were implemented, the government could lose between NT$30 billion and NT$40 billion in tax income, Chang quoted the finance ministry as saying yesterday.

In addition, business groups hope the personal income tax ceiling rate of 40 percent for high-income earners would be lowered to 30 percent, not the ministry's proposed 35 percent, Chang said.

To benefit all wage earners, Chang said business groups were also urging the government to cut out the 6 percent minimum income tax bracket.

As a result of the business groups proposed tax cuts, the government could lose between NT$70 billion and NT$80 billion in tax income, Chang said.

To counterbalance the tax losses, the government should raise the 5 percent value-added tax by between 1 percent and 2 percent, Chang said.
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