The Ministry of Finance is open to discussions about lowering the business tax on the financial industry proposed by the Financial Supervisory Commission (FSC), Minister of Finance Chuang Tsui-yun (莊翠雲) said at a meeting of the legislature’s Finance Committee yesterday.
Taiwan raised the business tax rate on banks and insurance companies to 5 percent from 2 percent in 2014, with part of the tax revenue being allocated to a special reserve fund to buffer against potential risks or losses. From 2014 to last year, about NT$216.2 billion (US$6.71 billion at the current exchange rate) in business tax revenue had been allocated to the special reserve fund, ministry data showed.
As the relevant provisions are about to expire at the end of next year, FSC Chairman Thomas Huang (黃天牧) on Wednesday last week said he hoped to discuss with the finance ministry to return the business tax rate to at least the 2 percent level seen before 2014.
Photo: Chu Pei-hsiung, Taipei Times
Democratic Progressive Party (DPP) Legislator Michelle Lin (林楚茵) yesterday said a cut in the tax rate to 2 percent from 5 percent could help the financial industry save at least NT$25 billion to NT$30 billion a year and she asked what the finance ministry’s stance is.
In response, Chuang said her ministry would evaluate the pros and cons of the FSC proposal and submit a report within a month.
According to the ministry’s assessment, if the business tax rate is lowered to 2 percent and the tax revenue does not go into the reserve fund, but into the national coffers, it ends up contributing to the nation’s tax income, Chuang added.
Tax Administration Director-General Sung Hsiu-ling (宋秀玲) said she agreed that tax cuts would be positive for the financial industry overall, but what deserves further consideration is whether the reserve fund is sufficient should something go wrong.
The business tax for the financial industry in Taiwan covers four categories, with the rate set at 5 percent on banks and insurance companies, 2 percent on exclusive businesses other than banks and insurance firms, 1 percent on reinsurance premium income and 5 percent on other non-exclusive businesses.
Taiwan lowered the business tax rate on banks and insurance companies to 2 percent from 5 percent in 1999 following the Asian financial crisis and further cut it to zero in 2001 to support the local financial industry.
In 2005, the nation raised the rate to 2 percent to replenish the financial reconstruction fund, which was prevously established to clean up the bad loans of poorly run financial institutions, and in 2014 increased the rate to 5 percent, of which 2 percent went to the special reserve for the financial industry and 3 percent went to the national coffers.
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