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Inheritance, gift tax reform proposals move on to Cabinet

The Tax Reform Committee yesterday wrapped up talks on inheritance and gift tax reform by suggesting the government would lower the cap of the tax to 30 percent, 25, percent, 20 percent or 10 percent, or keep it unchanged at 50 percent. Cabinet officials are inclined to adopt the lowest of these.

With academics calling for supporting measures and refusing to endorse any reduction, Minister of Finance Lee Sush-der (李述德) said after the meeting that it was up to the Cabinet to settle the matter and his ministry would make its own recommendation. The Cabinet will consider the matter at its meeting tomorrow.

“Committee members share the opinion that there must be supporting measures, no matter how much the tax is cut,” Lee said. “Personally, I’d rather forfeit some tax income to help spur economic growth.”

Lee’s remark is consistent with Vice Premier Paul Chiu (邱正雄), who said in a position paper that the ceiling of the inheritance and gift taxes should be lowered to 10 percent to halt capital outflow and encourage Taiwanese investors to return from overseas.

Chiu, convener of the tax reform panel, said an average of NT$1.2 trillion (US$37.05 billion) in capital fled the country each year over the last five years, partly to evade the levy, the fourth-highest in the world.

“The amount [of capital fleeing the country] would drop by NT$120 billion, or 10 percent, if the taxes were capped at 10 percent,” Chiu said in the paper.

Chiu’s calculations showed that the tax cut would generate an extra NT$8.1 billion in tax revenues each year.

Presently, the inheritance levy ranges between 2 percent and 50 percent depending on the wealth inherited, and averaged about NT$23.5 billion, or 1.5 percent, of total annual tax revenue over the last five years.

Chiu said a ceiling of more than 10 percent would not provide sufficient incentive for Taiwanese businesspeople abroad to return and make investments.

Tseng Chu-wei (曾巨威), vice convener of the reform committee and a public finance professor, urged the Cabinet to enhance social welfare benefits, expand the tax base and adopt other supporting measures if it intends to cut the tax.

“All proposed tax rates need complementary measures,” Tseng told reporters. “That’s the only consensus reached. The government should approach the issue from different angles rather than focus its attention on the tax rates.”
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