The dropping of a tax agreement with China on Tuesday is not necessarily a bad thing for Taiwan and proves that the deal will have to gain more support before being signed, experts said.
Representatives from Taiwan and China signed three agreements on Tuesday: on agricultural inspection and quarantine cooperation, industrial standards testing and certification cooperation, as well as fishery labor cooperation.
A fourth item on the agenda — an agreement on avoiding double taxation and strengthening tax cooperation — was not signed, as the two sides failed to reach a consensus, citing “technical issues.”
The development marked the first time since cross-strait talks resumed last year after a nine-year hiatus that an agreement that had been put on the agenda was not signed.
“China never presumes it has to reach concrete results before entering negotiations,” National Taiwan University economics professor Kenneth Lin (林向愷) said.
“Not being able to sign the agreement … is not necessarily a bad thing for us. We don’t have to set a deadline and tie our hands,” he said.
Most Taiwanese businesspeople investing in China do so through companies in a third country to avoid being taxed, Lin said, adding that Taiwanese business operators are mostly concerned that “China has been using tax inspections as a tool to pester Taiwanese businesses in China.”
Tax agreements are usually signed between allies, friendly countries or countries at similar levels of economic development, but that is not the case between Taiwan and China, Lin said.
“The key here is not tax issues but political issues, such as the wording of the document,” he said.
“At the end of the day, a government has to protect its taxpayers,” Lin said.
Others looked at the negotiations in a different light.
Yin Nai-ping (殷乃平), a professor of finance at National Chengchi University, said the “technical issues” that nixed talks on taxation were related to the avoidance of double taxation.
“Taiwan may have requested that Taiwanese companies that are investing indirectly in China through a third country be included on the double taxation list in the negotiations, but China refused to accept this,” Yin said.
Taiwan’s opposition parties have questioned whether taxpayer information could end up in the hands of the Chinese authorities once an agreement on tax cooperation takes effect, which has raised concerns among local businesspeople, Yin said.
“The widespread uneasiness over the issue made Taiwanese officials particularly cautious in the talks,” he said.
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