The distribution of wealth is a major economic issue for every country, and it is one that needs to take into account both fairness and social justice. Capitalist countries rely on the levying of taxes to redistribute wealth, and a good tax system can make the rich hand over some of their wealth to the government, which then redistributes it to disadvantaged groups via social welfare payments.
In Taiwan, however, the rich leverage methods such as setting up trusts and transferring assets overseas to avoid paying taxes, and this means the government’s major source of revenue is the middle class, which for a long time now has been on the verge of joining the ranks of the poor.
The government suffers from a lack of revenue and often struggles to meet overheads, which means that it is incapable of performing the function of transferring the wealth of the rich to disadvantaged groups.
Taiwan’s rich will keep getting richer while the poor will keep getting poorer, and eventually, Taiwanese society will be characterized by pessimism, criticism and distrust of the government.
Since President Ma Ying-jeou (馬英九) and his administration came into power, the three things the average person on the street has felt most strongly about are increasing real estate prices, low salaries and endless taxes. However, there are people in our society who do not have to work very hard and can still enjoy lavish lifestyles. There are others who make huge profits from speculating on real estate without having to worry about paying taxes.
Taiwan’s system is very unfair and it could be described as “one Taiwan, two worlds.”
There are three things that the Ma government must do to plug the economic black hole:
First, it needs to make taxes fairer. The current system uses tax brackets that were drawn up more than a decade ago. However, times have changed and these tax brackets should be adjusted. The government also needs to come up with ways reasonably tax the rich while also using bilateral cooperation mechanisms to make money earned overseas by Taiwanese taxable in Taiwan.
Second, it needs to tax people on the actual transaction prices for the real estate they sell. Many speculators buy and sell real estate to make a quick profit, and the money they make in a single deal can be greater than most officer workers’ annual income. Despite this, money made in this way is not subject to taxation, which is unreasonable.
Taxing people on the actual transaction prices for real estate would increase government revenue and also serve to end the inappropriate manipulation of real estate prices.
Finally, it needs to make salaries more reasonable. Over the past two decades, commodity prices have fluctuated greatly, but salaries have not been adjusted to accommodate for these changes. Raising salaries to a more reasonable level cannot be accomplished by merely increasing the minimum wage. Rather, businesses must bring salaries into line with the amount of work employees perform.
When it comes to policy guidance, the government could publicize the names of companies that pay low salaries, and require that listed companies announce the salary structures of their board members, managers and employees in their financial reports. This would let the public know whether a certain company is earning money because they are doing well at what they do or because they are merely exploiting their employees.
The government must solve the cause of the economic black hole and steer Taiwan away from the polarization of the rich and the poor.
Sophie Tsou is an associate professor in the Department of Real Estate and Built Environment at National Taipei University’s College of Public Affairs.
Translated by Drew Cameron
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