The Tax Reform Committee failed to reach a consensus yesterday on the size of a proposed cut on the inheritance levy, as business representatives favored a ceiling of 10 percent while academics and activists said it was unacceptable.
Minister of Finance Lee Sush-der (李述德) said after the meeting that the committee reached an agreement to lower the rate but disagreed on the size of the cut.
The current levy ranges from 2 percent to 50 percent, depending on the wealth inherited, and averaged about NT$23.5 billion (US$736 million), or 1.5 percent, of total annual tax revenues for the past five years.
“There was agreement that the tax should be cut but not abolished,” Lee said, adding that the ministry would work to iron out the differences over the proposed cap, which ranges from 10 percent to 30 percent.
Huang Yo-phy (黃耀輝), a tax professor at National Taipei College of Business who delivered a speech at the committee, discouraged implementing a radical cut without supporting measures.
Huang suggested capping the tax at 30 percent and carrying the reduction in phases.
“Indeed, the current rates are overly high,” Huang said. “They rank the 4th highest in the world, dampening the country’s competitiveness in attracting capital.”
But Huang does not favor scrapping the tax, arguing the move would violate the principle of fairness and hurt the national treasury.
He pointed out that Hong Kong and Singapore abrogated the inheritance tax, but imposed a levy on capital gains to preserve financial health.
“The government must not quit pursuing equitable distribution of wealth while seeking to spur the economy,” Huang said.
The academic also proposed raising the exemption amount for inheritance taxes to NT$12 million, from the current NT$7.79 million. The ministry favors a bigger adjustment at NT$13 million.
But industrialists disagreed, contending that a more radical tax cut could boost the state coffers.
Wang Jeng-tang (王振堂), chairman of Taipei Computer Association (台北市電腦公會), said the levy should be lowered to 10 percent, if the government was serious about promoting the country as a regional financial center.
Wang said a tax cut on a smaller scale would not provide Taiwanese businesspeople based abroad adequate incentives to channel their capital home.
“Rich people will not move their money overseas to dodge the inheritance tax if it’s capped at 10 percent,” Wang said before attending the meeting. “Consequently, the government can collect more taxes.”
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