One day after the Ministry of Finance announced a delay in revoking tax incentives amid a mounting backlash, business leaders met with Minister of Finance Lin Chuan (林全) yesterday to express hopes that the government can strike a balance between economic development and tax reform.
The government had originally planned to make tech firms choose between a five-year tax holiday or tax exemption on selected types of investment. Currently companies can claim both, leading to some firms enjoying tremendous tax savings.
"It's very important that the government create an investor friendly environment from a macroscopic point of view," Rock Hsu (許勝雄), chairman of the Taiwan Electrical and Electronic Manufacturers Association (電電公會), told the Taipei Times yesterday.
Hsu joined Theodore Huang (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (工商協進會), Morris Chang (張忠謀), chairman of Taiwan Semiconductor Manufacturing Co (台積電) and other industry heavyweights in exchanging opinions with Lin during a two-hour long closed-doors meeting.
Hsu said following heated discussions, Lin agreed that firms investing in so-called "emerging strategic industries" should enjoy both the five-year tax exemption and tax reductions on functional investment items, including research and development and purchases of new machines and equipment.
Details from the finance ministry were not available as of press time.
After a barrage of strong protests and fierce criticism from tech firms, the ministry had originally proposed a compromise scheme, requiring that companies give up tax breaks on each single investment item.
Tech firms insisted that the government should revise related laws before imposing the changes.
"The finance ministry's proposal clearly goes against the law. Industrial circles are opposed to the ministry's hasty decision, as companies will have no rules to follow when deciding on large-scale investment projects," said Frank Huang (黃崇仁), chairman of the Taiwan Semiconductor Industry Association (台灣半導體協會) and the Taipei Computer Association (台北市電腦公會). The two associations represent about 5,000 local electronics manufacturers.
While the ministry eventually decided to scrap the proposal on Monday night, Lin said the Statute for Upgrading Industries (促進產業升級條例), which provides both functional and industry-based incentives, would require adjustments to revoke any excessive stimuli.
During yesterday's meeting, Hsu said that industry leaders had also suggested that the government consider adjusting business income tax and personal income tax down, after the alternative minimum tax takes effect next month.
They also hoped that the government would discuss the possibility of revoking the 10-percent tax rate on the "undistributed surplus earnings" of companies soon and carefully consider how to strike a balance between pursuing economic development and pushing forward tax reform, Hsu said.
Separately, Ho Mei-yueh (何美玥), Minister of Economic Affairs, said yesterday that if the government wants to go ahead and cut tax incentives, then it should offer a grace period for local companies to allow them to come up with effective strategies.
It would create a heavy burden for local companies if the government simultaneously shrinks tax incentives and launches the renewed minimum tax scheme, Ho said.
"We hope to have more discussions about the tax changes," Ho said, adding that the government should provide stable tax rules for companies to follow.
The ministry now gives local companies, mostly high-tech firms, tax credits for purchasing new machines as well as tax exemption for five years.
Ho said that the ministry has already tightened the qualifications for tax preference and reduced the percentage of tax credits to 7 percent from the previous rate of 11 percent.
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