President Ma Ying-jeou (馬英九) yesterday approved the Executive Yuan’s preliminary proposal for the free economic pilot zones and expressed hope that the plan could be finalized by the end of this month.
Ma also instructed the Executive Yuan to establish a promotion task force to communicate with lawmakers, the media and concerned industries, and submit the draft of the special regulations for free economic pilot zones (自由經濟示範區特別條例) to the legislature for review this month.
Ma made the instructions after he was briefed by Council for Economic Planning and Development (CEPD) Minister Kuan Chung-ming (管中閔) on the proposal at a meeting at the Presidential Office, which was also attended by Premier Jiang Yi-huah (江宜樺), Vice Premier Mao Chi-kuo (毛治國) and members of the Cabinet.
Based on the council’s plan, Taiwanese companies will be exempt from taxes on net profits and dividend income generated from their oversea operations if these companies are willing to invest the money in the free economic pilot zones.
Overseas companies, which operate warehouses or process goods in the zones, will enjoy a business tax exemption on 10 percent of the imported goods and on all exported goods for three years, the council said.
The president agreed to halve the income tax for employees from overseas working for companies operating in the free economic pilot zones during the first three-year period. Those employees would be exempted from tax upon dividend income.
“In the revised plan, we tried to shift the focus of the free economic pilot zones to easing regulations, rather than tax reduction,” Kuan said.
The council estimated that the revised pilot zone plan would help boost private investment by NT$21 billion (US$709 million) and GDP by NT$30 billion next year, as well as creating 13,000 jobs. Local banks and securities firms are expected to grow their revenue by NT$30 billion and NT$40 billion respectively, in the five years after the plan takes effect, it said.
The Ministry of Finance (MOF) and Chinese Nationalist Party (KMT) Legislator Tseng Chu-wei (曾巨威) are leery of those tax breaks, given the erosion of the government’s tax revenue income and difficulty of ending such incentives.
Foreign companies operating in the zones that introduce new technologies to the nation or set up global operation headquarters in the zones would not enjoy those tax incentives, as had been planned in the previous plan.
“Certain tax reductions may not provide a long-term boost to the economy and can be canceled, but we still have to reduce certain taxes to the same level as our trade peers to attract investment,” Kuan said last month.
The council made the announcement yesterday after the Cabinet submitted the revised plan of the free economic pilot zones to the president and KMT legislators.
The government will also allow professionals, including lawyers, accountants and architects from foreign countries, excluding China, to invest in local companies or set up local branches with local partners in the zones, the council said.