Sun, May 18, 2014 - Page 3 News List

Legislative Yuan approvals move tax reforms ahead

Staff writer, with CNA

The Legislative Yuan on Friday approved several tax reform measures aimed at narrowing Taiwan’s rich-poor divide that could increase tax revenues by an estimated NT$65 billion (US$2.16 billion) a year.

The amendments to the Income Tax Act (所得稅法) give average taxpayers a break through higher deductions that will reduce their taxable income. The standard deduction is to increase from NT$79,000 to NT$90,000 for single payers and from NT$158,000 to NT$180,000 for married couples.

In addition, the special deduction on salary and for people with disabilities will be raised from NT$108,000 to NT$128,000.

The higher deductions and other tax breaks will cost the government an estimated NT$15 billion in revenues, to be partially offset by an increase in the highest marginal tax rate for individual taxpayers to 45 percent, applicable to annual taxable income above NT$10 million. The measure is expected to generate an estimated NT$9.9 billion a year in revenues, officials said.

The “imputation tax credit” — the share of an investor’s tax paid by a company on the profit from which that person’s dividends are paid — will be cut in half, adding another NT$50.5 billion in tax revenues, according to Ministry of Finance estimates.

Also passed was an amendment to the Value-added and Non-value-added Business Tax Act (加值型及非加值型營業稅法) that is to increase the business tax rate on “core business” revenues of banks and insurers from 2 percent to 5 percent.

The business tax rate was 5 percent until 1999, when the government lowered it to help reduce the financial burden of banks battered by the Asian financial crisis in the late 1990s.

The measure should increase revenues by NT$18.1 billion a year, the finance ministry estimated.

Minister of Finance Chang Sheng-ford (張盛和) estimated on Friday that an additional NT$65 billion will be raised by the government annually.

The income tax adjustments are to take effect on Jan. 1 next year and be reflected when taxpayers file in 2016.

The increase in the business tax on financial services could take effect in July at the earliest, the ministry said.

The amendments are part of what the government describes as a “feedback tax” system, under which some businesses and high-income earners are being asked to give back to society through higher taxes.

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