The legislature’s Finance Committee yesterday acquiesced to keep business tax unchanged for financial institutions, but asked officials to draw up measures in the next legislative session to increase their tax contribution.
Lawmakers from across party lines are seeking to raise the sector’s business tax, which is currently at 2 percent, but remain divided on the size of an increase and how to use any additional tax income.
Chinese Nationalist Party (KMT) Legislator Lu Shiow-yen (盧秀燕) suggested moving the discussion to the spring session so that the Ministry of Finance and the Financial Supervisory Commission could come up with their own bill on the issue and improve contributions to the state coffers.
Companies in other sectors have to pay a business tax of 5 percent, driving lawmakers to raise fairness concerns as financial institutions plan to distribute generous year-end bonuses and achieve pre-tax profits approaching NT$300 billion (US$9.92 billion).
“It is time financial sectors bear an equal tax burden after enjoying light duty at the expense of other taxpayers,” People First Party Legislator and finance academic Thomas Lee (李桐豪) said.
The government eased business tax for financial institutions to help stabilize the nation’s financial system in the wake of the regional financial crisis in 1997.
The 2 percent business tax paid by financial firms flows to the deposit insurance system and financial restructuring funds, while the 5 percent levy on non-financial companies go into the state chest.
These rules mean that financial companies have counted on public money in times of stress, while other companies are on their own, Democratic Progressive Party Lawmaker Lin Chia-lung (林佳龍) said.
A single percentage-point increase in business tax for the financial sector may generate an extra NT$9.5 billion a year for the national treasury.
Lawmakers said a national treasury increase could be used for the cash-strapped national pension funds and other spending.
Minister of Finance Chang Sheng-ford (張盛和) disagreed, and said that the financial woes of individual banks may set off a confidence crisis and upset the entire system, risks not usually seen in other sectors.
The ministry is working on national finance enhancement measures, with the possibility of adding tax burdens on financial companies at the right time, Chang said.
Financial Supervisory Commission Chairman William Tseng (曾銘宗) said he is not against fair taxation, but said that the Central Deposit Corp (中央存保) needs more funds to prop up its operations and maintain financial stability.
Countries like the UK, France and Japan spare financial institutions from business taxes due to the difficulty in measuring costs and earnings, Tseng said.
Increased tax burdens may squeeze deposit interest rates, which is unfavorable for the average customer, Tseng said.
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