Chinese Nationalist Party (KMT) Legislator Ting Shou-chung (丁守中) yesterday defended his proposed draft bill on continuing the government’s policy of granting tax breaks to corporations.
Ting told a press conference at the legislature that his proposal was meant to attract the top 500 international corporations to set up Asia headquarters in Taiwan. Those that do, and meet a few other requirements, would pay a flat business income tax of 15 percent.
Ting dismissed criticism from the Democratic Progressive Party (DPP) that the proposal would only benefit corporations, adding that he was trying to “find a way out” for Taiwan’s economy.
Ting called a press conference after the Executive Yuan said on Saturday that it would eliminate the proposed tax breaks because they were controversial.
Premier Wu Den-yih (吳敦義) and economic officials briefed President Ma Ying-jeou (馬英九) on Saturday on the new version of a draft statute on promoting innovative industries.
The draft failed to clear the legislature in the last session. It was designed to encourage businesses to focus on research and development and personnel training, as well as attract multinational firms to set up operational headquarters and international logistics and distribution centers in Taiwan via tax cuts.
Legislators agreed to deal with the draft after the spring legislative session begins later this month.
The draft was proposed so tax breaks for firms could continue after the Statute for Industrial Upgrading (促進產業升級條例) expired last year.
“I have become the target of attacks recently for allegedly trying to benefit some local conglomerates,” Ting said.
Ting said he made the proposal because he was told that only a few domestic high-tech companies, such as Hon Hai Precision Industry, Quanta Computer, Asustek Computer and Acer Inc, would make it into the top 500 list.
However, these high-tech companies already enjoy other tax breaks that drive their real tax rate to between 10 percent and 13 percent, even lower than his proposed 15 percent, meaning that there should be no question of giving conglomerates special benefits, he said.
“This is why I have not proposed an exclusion of local manufacturers from the draft bill,” Ting said.
Taiwan’s standard corporate income tax rate was recently lowered from 25 percent to 20 percent and will first be applied to income earned this year.
Critics have also said Ting’s proposal would drain too much from national coffers, but the lawmaker said a DPP proposal last October to grant a 15 percent corporate tax rate to all foreign companies with headquarters in Taiwan and annual revenues of more than NT$1 billion (US$31 million) would have cost the government NT$18.1 billion.
In contrast, Ting estimates his proposal would cost about NT$500 million.
Regardless of the numbers, the lawmaker said he felt something must be done. In his main constituency of Tianmu (天母), long a center of the international community, the number of foreign residents has been on the decline, he said.
Ting said many foreign companies had quit Taiwan over cross-strait wrangling in the past and now they were leaving because of the nation’s tax system.
Citing data from the Investment Commission of the Ministry of Economic Affairs, he said foreign investment had declined from US$15.3 billion in 1997 to US$4.7 billion last year.
He urged Ma and Wu to insist on taking a position “that would benefit Taiwan” instead of giving in to “groundless criticism.”
ADDITIONAL REPORTING BY CNA
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