Taiwan-US tariff negotiations have yielded a preliminary outcome, but beyond the announced 20 percent levy, few concrete details have emerged. Automotive tariffs have been a focus in the talks, which has led to discussions about whether Taiwan’s Commodity Tax Act (貨物稅條例) on motor vehicles might be adjusted.
For example, with an average price of about NT$70,000 for motorcycles, buyers pay a 17 percent commodity tax, or about NT$12,000. If the tax were abolished, people would naturally expect a similar drop in retail prices, but such expectations might be optimistic.
There are precedents in which tax reductions failed to translate into lower prices. Businesses often seek to profit from the tax cut. For example, when New Zealand removed tariffs on fresh milk, consumer prices remained largely unchanged.
If the government aims to pass savings on to the public, it might need to mandate direct price reductions. Otherwise, in the case of motorcycles, if prices do not drop by the full NT$12,000, the result would be a loss in tax revenue without corresponding benefits to consumers, effectively turning a tax policy into a subsidy for manufacturers.
More broadly, if lower taxes make gasoline-powered motorcycles significantly cheaper, it could undercut incentives for people to switch to electric vehicles, undermining national goals to reduce carbon emissions. The government waives the commodity tax on electric motorcycles to promote that transition. Granting the same tax break to gasoline-powered models would nullify that advantage.
Any cut in the tax should be paired with forward-looking, supportive policies. For example, offering special deductions for people who purchase sustainable vehicles, which would be applied when filing their personal income tax. That would ensure that public funds continue to steer the market toward sustainable transportation options.
Tax reform must be carefully evaluated for fairness, its long-term impact on the economy and environmental sustainability. Only through thorough planning, robust oversight and consistent policies can reforms serve the broader good.
Elvis Lee is an adjunct assistant professor in Fo Guang University’s Department of Public Affairs.
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