A proposal to cover long-term care costs by increasing taxes on cigarettes by NT$20 (US$0.63) per pack is expected to pass its final vote in the legislature this week.
The legislature is scheduled to deliberate on proposed amendments to the bill on long-term care services for the nation’s older and vulnerable citizens in a committee today, which includes increasing estate, gift and tobacco taxes.
A vote on the proposal on Wednesday is expected to pass.
According to the draft, the estate and gift taxes would be increased from 10 percent to 20 percent, while the tobacco tax would be increased from NT$590 to NT1,590 per 1,000 cigarettes. The additional revenue would be used to finance a long-term care fund.
The estate and gift taxes are expected to increase revenue by NT$6 billion and the tobacco tax by NT$15.8 billion, the Ministry of Health and Welfare said.
Taxes on individual packs of cigarettes are to rise from about NT$11.8 to NT$31.8, which is expected to lead to a corresponding increase in market prices, the ministry said.
The tax hikes are expected to generate NT$21.8 billion in revenue, enough to cover the cost of long-term care needs for this fiscal year, which are estimated at NT$17.7 billion for the initial stage of “long-term care services program 2.0,” it added.
Chinese Nationalist Party (KMT) Legislator Chiang Wan-an (蔣萬安) said that although he believes the tax hikes are a “done deal,” he continues to have reservations as to whether they are a financial solution, adding that the taxes are “unstable sources of revenue from year to year.”
“The wealthy are already moving their assets to offshore tax havens and fiscal problems will surely resurface in five years’ time. Making smokers pay more taxes to support long-term care is a perverse way to encourage smoking, and raising prices would only exacerbate rampant tobacco smuggling,” Chiang said.
New Power Party Legislator Hsu Yung-ming (徐永明) said he is supporting an increase to the estate and gift taxes on the condition that the legal mandate is written with effective policy implementation and follow-up.
“Regarding the tobacco tax, responsible agencies have not clarified how raising prices could reduce the smoking population and serve as a source of revenue at the same time; as such, its instability as a revenue source will be an inevitable problem,” he said.
The Ministry of Finance’s estimates that the tobacco tax increase would reduce the annual quantity of cigarettes consumed by 330 million packs, Democratic Progressive Party Legislator Lin Ching-yi (林靜儀) said, adding that the tax hike is “good public health policy” and generating sufficient revenue is “a small problem for the moment.”
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