The government has sidelined a plan to lower the business income tax rate from 20 percent to 15 percent for multinational corporations establishing headquarters in Taiwan, the Ministry of Economic Affairs said yesterday.
Tax fairness advocates had criticized the tax-break plan, saying it would only benefit big corporations, while larger domestic companies, which had already enjoyed R&D-based tax breaks, threatened to pull out of Taiwan if they could not enjoy the planned lower rates.
To placate both sides, the government is working on a scheme to offer tax credits to local companies targeting brand-building and global marketing, Vice Minister of Economic Affairs Hwang Jung-chiou (黃重球) told a press conference.
“Unlike manufacturing, it’s more difficult to evaluate what constitutes R&D in the service sector. In view of changes in the mode of business, we needed to draw up clear regulations in this regard,” Hwang said.
Early this month, President Ma Ying-jeou (馬英九), Premier Wu Den-yih (吳敦義) and economic officials decided after a meeting at the Presidential Office to withdraw support for a controversial article in a draft statute on promoting innovative industries (產業創新條例).
The article, proposed by a group of Chinese Nationalist Party (KMT) lawmakers led by Ting Shou-chung (丁守中), stated that multinational corporations establishing corporate headquarters in Taiwan and meeting certain requirements could receive a flat business income tax of 15 percent — 5 percentage points lower than the recently adopted rate for businesses.
The ministry said the article could have been applicable to some Fortune 500 companies, which would include four local enterprises — Hon Hai Precision Industry Co (鴻海), Acer Inc (宏碁), Asustek Computer Inc (華碩) and Quanta Computer Inc (廣達).
The article was of particular concern to Acer, which has shifted is core business away from manufacturing to focus on global brand building.
Lawmakers proposed that the article be included in the draft statute, which was initiated by the government to continue some of the tax breaks stipulated in the Statute for Industrial Upgrading (促進產業升級條例) that expired at the end of last year.
However, the draft statute was stalled in the legislative session that ended last month because activists expressed strong concern over possible tax inequity, saying it would only favor major companies.
Huang said removing the article would reduce the estimated annual tax loss to an estimated NT$30 billion (US$934.8 million). Activists had said that the original version could cost the national treasury about NT$50 billion in annual tax revenue.
Acer chairman Wang Jeng-tang (王振堂) has voiced opposition on several occasions to removal of the article.
Acer is the world’s second-largest PC maker after the US’ Hewlett-Packard Co. The company reportedly said it had received invitations to relocate its headquarters elsewhere.
Minister of Economic Affairs Shih Yen-hsiang (施顏祥) said yesterday he had spoken to Wang over the phone and Wang urged the government to offer more preferential incentives to both local and foreign quality enterprises to increase their willingness to invest in Taiwan.
Calls to Quanta, the world’s second-largest contract notebook maker, went unanswered yesterday, while the public relations department at Asustek, the pioneer of netbook computers, refused to comment.
The Chinese-language United Evening News reported yesterday that both Quanta and Asustek would set up internal committees to evaluate the impact of the decision.
ADDITIONAL REPORTING BY JASON TAN
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
SLOW-MOVING STORM: The typhoon has started moving north, but at a very slow pace, adding uncertainty to the extent of its impact on the nation Work and classes have been canceled across the nation today because of Typhoon Krathon, with residents in the south advised to brace for winds that could reach force 17 on the Beaufort scale as the Central Weather Administration (CWA) forecast that the storm would make landfall there. Force 17 wind with speeds of 56.1 to 61.2 meters per second, the highest number on the Beaufort scale, rarely occur and could cause serious damage. Krathon could be the second typhoon to land in southwestern Taiwan, following typhoon Elsie in 1996, CWA records showed. As of 8pm yesterday, the typhoon’s center was 180km
TYPHOON DAY: Taitung, Pingtung, Tainan, Chiayi, Hualien and Kaohsiung canceled work and classes today. The storm is to start moving north this afternoon The outer rim of Typhoon Krathon made landfall in Taitung County and the Hengchun Peninsula (恆春半島) at about noon yesterday, the Central Weather Administration (CWA) said, adding that the eye of the storm was expected to hit land tomorrow. The CWA at 2:30pm yesterday issued a land alert for Krathon after issuing a sea alert on Sunday. It also expanded the scope of the sea alert to include waters north of Taiwan Strait, in addition to its south, from the Bashi Channel to the Pratas Islands (Dongsha Islands, 東沙群島). As of 6pm yesterday, the typhoon’s center was 160km south of
STILL DANGEROUS: The typhoon was expected to weaken, but it would still maintain its structure, with high winds and heavy rain, the weather agency said One person had died amid heavy winds and rain brought by Typhoon Krathon, while 70 were injured and two people were unaccounted for, the Central Emergency Operation Center said yesterday, while work and classes have been canceled nationwide today for the second day. The Hualien County Fire Department said that a man in his 70s had fallen to his death at about 11am on Tuesday while trimming a tree at his home in Shoufeng Township (壽豐). Meanwhile, the Yunlin County Fire Department received a report of a person falling into the sea at about 1pm on Tuesday, but had to suspend search-and-rescue
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