Sat, May 02, 2009 page1

• Lawmakers pass income, business tax cut changes

  • By Shih Hsiu-chuan and Loa Iok-sin / STAFF REPORTERS
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  The legislature yesterday passed an amendment to the Income Tax Act (所得稅法) that would benefit companies and about 70 percent of middle and low-income households when they file tax returns in May 2011 for next year.

  The amendment reduced the rates of consolidated individual income tax in three main brackets out of a total of five by 1 percentage point to 5 percent, 12 percent and 20 percent; the rates in the top two brackets remained unchanged at 30 percent and 40 percent.

  It also raised the thresholds of personal income tax in the lower four brackets — from NT$360,000 (US$10,850) to NT$500,000; from NT$800,000 to NT$1.09 million; from NT$1.6 million to NT$2.8 million; and from NT$3 million to NT$4.09 million, respectively.

  The Ministry of Finance estimated that the tax reduction measures would benefit 3.8 million households, out of a total of 5.3 million households in the country.

  As an example, the new measures would mean NT$12,300 in savings for a single taxpayer whose annual income is NT$600,000.

  For enterprises, the amendment stipulates that the income tax rate will be 20 percent if the total taxable income of an enterprise is less than NT$120,000. Companies that earn less will be exempted from the tax.

  Under the current rules, the enterprise income tax rate is 25 percent for a firm whose total taxable income is more than NT$100,000 and 15 percent for those whose taxable income falls below NT$100,000. Enterprises whose total taxable income is less than NT$50,000 are exempted from the tax.

  The revisions were expected to result in an annual loss in tax revenue of NT$24.8 billion.

  Chinese Nationalist Party (KMT) caucus whip Yang Chiung-ying (楊瓊瓔) said the amendment could help economically disadvantaged people and encourage more businesspeople to invest in the country.

  However, the Alliance for a Fair Tax Reform (AFTR) yesterday panned the Legislative Yuan for adopting a tax reduction deal that they said would only benefit the wealthy.

  “While the tax cuts look like they're designed to benefit low income households, they do nothing at all for the 1.6 million households who already qualify for tax exemption, the unemployed and people without taxable incomes, such as farmers,” AFTR member Lin Lu-hung (林綠紅) told a news conference at the legislature.

  “On the other hand, the wealthy may benefit multiple times from the new system,” Lin said.

  The tax system divides annual income into several categories depending on the amount, and the design of the tax reduction plan would give a 1 percent deduction to each category.

  “For example, if your annual income is NT$3 million, you would receive a 1 percent cut in the NT$2 million to NT$4 million category, another cut in the NT$1 million to NT$2 million category, and another in the NT$400,000 to NT$1 million category,” AFTR spokesman Sun Yi-hsin (孫一信) said, adding that those with lower income would qualify for tax cuts in smaller numbers of categories.

  Combined with the legislature's decision to cut business taxes, “together, the government will suffer a loss of NT$24 billion in tax income — and it's our children and grandchildren who will have to pay for it,” another alliance member Yeh Ta-hua (葉大華) said.

  Also See: Needy can apply to delay tax payments
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