A major trade group yesterday urged the government to secure a double taxation agreement with the US, as Taiwanese investments in the US are subject to stiff corporate income and dividend taxes.
The Third Wednesday Club (三三會), whose membership is limited to the top 100 firms in each business sector, made the plea during its monthly gathering in Taipei.
Taiwan and the US early this month signed the first agreement under the US-Taiwan Initiative on 21st-Century Trade, which would streamline customs administration, regulatory practices and step up anticorruption efforts, among other things.
Club chairman Lin Por-fong (林伯豐) expressed the wish that Taiwan would next seek to ink a pact to eliminate double taxation.
The two sides have agreed to hold more negotiations on other issues.
BENEFITS
The US-Taiwan agreement gives Taiwan very limited economic benefits, as it functions more like a framework, rather than a conventional free-trade agreement that comes with tariff reductions or exemptions, as well as market access, Lin said.
A double taxation agreement, on the other hand, would provide substantial benefits, as Taiwanese firms’ investments in the US are subject to a 21 percent corporate income tax and an additional 30 percent tax for repatriating profits to Taiwan, Lin said.
A double taxation treaty should keep the taxes within a range of 3 to 15 percent, he said.
Lin, who is the chairman of Taiwan Glass Industry Corp (台灣玻璃), also commented on wage increases, saying he agreed that profitable companies should raise wages for employees to help them absorb the blow of inflation.
However, policymakers should take economic growth into consideration when weighing the pace of wage hikes, he said.
WAGE HIKE
The adjustment should be capped at 2 percent this time, in line with the government’s projected GDP growth for this year, Lin said, adding that many firms share his view.
The Ministry of Labor is to tackle the issue next quarter after recently agreeing to the need to adjust wages.
Taiwan’s economy will have difficulty expanding more than 2 percent this year, as the impact of global monetary tightening would grow more evident, while geopolitical tensions induced by the Ukraine war linger, Lin said.
Different sectors are also worried about energy shortages, which are very likely to happen once the Russia-Ukraine war comes to an end and the world economy regains its growth momentum, Lin said.
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