Government backs away from national security tax

The administration yesterday denied it is preparing to implement a "national security tax" on companies that set up factories or operations in China, reversing comments by officials on Saturday.

The Government Information Office (GIO) yesterday issued a written statement saying key government units such as the Ministry of Economic Affairs and Ministry of Finance "up to now do not have any such plan to impose a national security tax program."

GIO director-general and chief government spokeswoman Chung Chin (鍾琴) on Saturday told reporters that such a tax might be a good idea and may be considered by the government.

The idea, recently proposed by scholar Chen Shih-meng (陳師孟), now vice-governor of the Central Bank, "does not represent the government's current policy," the information office said.

President Chen Shui-bian (陳水扁) mentioned such a tax last April, but was pressured to give up the idea.

None of the policy papers issued by the DPP during Chen's campaign made mention of the tax.

Chen stated that the idea of a national security tax was merely a concept put forth by scholars.

The proposed tax has come under fire, however.

Sun Ko-nan (孫克難), research fellow at the Chung Hua Institution for Economic Research (中華經濟研究所), said that if the tax were implemented, Taiwanese firms would finds ways of investing in China without being detected.

The tax would also go against the trend towards an increasing international division of labor, and would reduce Taiwan's competitiveness, Sun said.

With both China and Taiwan likely to accede into the WTO in the near future, Taiwan should reconsider the idea of a national security tax, said Norman Yin (殷乃平), a professor of banking at National Chengchi University.

Taiwan also receives some tax revenue from its investments in China through taxes on profits repatriated to companies in Taiwan, said Yin.