Minister of Finance Chang Sheng-ford (張盛和) announced yesterday that the ministry will increase various income tax deductions and exemptions for taxpayers because consumer prices for the past three years have reached the tax reduction threshold.
The ministry will announce the final deductions and exemptions by the end of this month at the earliest. The new measures will be applied to the income taxpayers receive next year, with taxes to be reported and submitted in 2014.
Under the Income Tax Act (所得稅法), the Ministry of Finance has to adjust upward the amount of tax deductions and exemptions if the nation’s average headline inflation rate between November and October a year later rises by more than 3 percent compared with the level recorded when the tax was last reduced.
The composite consumer price index (CPI) averaged 108.76 points from November last year to last month and the Directorate-General of Budget, Accounting and Statistics (DGBAS) said the index had reached 110.34 last month.
The 108.76-point level was an increase of 3.47 percent from the average level recorded from November 2007 to October 2008, the year the ministry last adjusted the tax deduction and exemption amounts.
“All of these amounts have to be increased in line with the rising rate of headline inflation,” Chang said in a legislative question-and-answer session.
The ministry is expected to raise the exemption amount by NT$3,000 (US$103) for people below the age of 70 and by NT$4,500 for those aged 70 and above, while boosting the standard deduction amount by NT$2,000 for a single person and by NT$5,000 for married couples.
The special income tax deduction from salaries or wages and the special deduction for the disabled will be raised by NT$3,000 each.
The tax reduction plan may lower the nation’s tax revenue by between NT$6.8 billion and NT$7 billion a year, ministry data showed.
In related news, annual growth of the nation’s headline inflation rate slowed to 2.36 percent last month, from the 2.96 percent a month earlier, the DGBAS said in its monthly report.
However, it was the fourth straight month the CPI has grown by more than 2 percent from a year earlier, the report said.
Vegetable and fruit prices saw an 11.57 percent and 18.85 percent increase respectively from the previous year, the report’s data showed.
The increase further drove up the annual growth in overall food prices to 4.24 percent last month — the highest of the seven components in the index, statistics showed.
In the first 10 months of the year, the headline inflation rate rose 2 percent from a year earlier, according to the DGBAS’ data.
However, annual growth in headline inflation may remain lower than 2 percent this year, as vegetable and fruit prices continue to slide back to a steadier level for this month and next month, DGBAS section chief Wang Shu-chuan (王淑娟) said.
In addition, sluggish global economic sentiment has been dragging down prices of international raw materials and weakening consumption, both of which may further slow inflationary pressure in the near-term.