Fri, Mar 25, 2011 - Page 3 News List

Academics criticize luxury tax

NO REAL FIX:A panel of experts said if the government really wanted to reform the unfair tax system, it should find a way to make rich people pay their taxes

By Ko Shu-ling  /  Staff Reporter

A proposed luxury tax that the Cabinet hopes to implement on July 1 will not fix the unjust tax system, and the government should tax capital gains by rich people while alleviating the burden on ordinary wage earners, who account for more than 70 percent of tax revenue, academics said yesterday.

Cheng Li-chun (鄭麗君), executive director of Taiwan Thinktank, which organized the event, said that while Taiwan’s economy had undergone a “miracle,” globalization had had a structural impact on industries, employment and the population.

“Among the many problems is the widening gap between rich and poor,” she said. “While rich people spend money on expensive cars and mansions, children from the lower [economic] stratum of society cannot afford school lunches.”

Facing a widening wealth gap, the administration of President Ma Ying-jeou (馬英九) recently proposed a luxury tax as a means to redress the inequality.

Cheng had doubts about the effectiveness of such a measure.

“This is like trying to kill a bull with a Swiss Army knife,” she said. “The biggest problem with this government is that it cannot get rich people to pay taxes. Unless it can find a way to make them pay more, the tax system will remain unfair.”

In addition to having their capital gains taxed, the nation’s wealthiest should shoulder the social responsibility of taking care of those who are less fortunate, Cheng said, adding that rich people should pay more taxes to ease the burden of ordinary wage earners.

Finally, the money collected from the rich could be used for investment in human resources and social welfare, she said.

Lue Jen-der (呂建德), a professor of social welfare at National Chung Cheng University, called the luxury tax a policy of “shame-kindness.”

Su Jain-rong (蘇建榮), a professor of public finance at National Taipei University, said the luxury tax was a front the Ma administration used to conceal a failure to deliver on its political promise of tax reform.

The administration said only those buying expensive items such as yachts and private jets exceeding NT$500,000 (US$16,800) would be taxed, but Su said those who can afford those luxuries usually buy them abroad and therefore would not submit to taxation.

Wang Jung-chang (王榮璋), convener of the Alliance for a Fair Tax Reform, said that while the money made by the nation’s 9 million wage earners makes up only 44.5 percent of GDP, they are paying 72.34 percent of the overall taxes.

“Does the administration really think they are unhappy because they see rich people buy expensive cars or fur coats?” he asked. “They are unhappy because the rich people are not paying taxes.”

While Ma said he would address the wealth gap with tax reform and social welfare, Wang said he has not seen any concrete or effective measure.

“On tax reform, he has proposed only the luxury tax,” he said. “Stupid. That is not the reform we want.”

Wang also expressed concern over increasing public debt, saying the government was estimated to have outstanding debt of NT$4.96 trillion this year and a potential debt of NT$19 trillion.

The administration continues to cut taxes and borrow more money, he said, adding that the interest accrued from public debt this year was about NT$132 billion, which accounts for 7.4 percent of the government’s annual expenditure.

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