The Ministry of Finance is expected to raise income tax deductions by the end of this year to ease the tax burden on income earners next year, as consumer prices have grown beyond the trigger point since previous adjustments.
Taiwanese file their income taxes in May each year for income earned the previous calendar year.
Assorted tax deductions are linked to the consumer price index, which has risen more than 3 percent over the past three years.
Photo: CNA
That increase qualifies for upward revisions to the allowances by the government so people would feel less of the pinch, KPMG Taiwan said.
The inflationary gauge last month picked up 2.63 percent from a year earlier, the highest in eight-and-a-half years, and might gain further momentum on the back of steep increases in global oil and raw material prices, the Directorate-General of Budget, Accounting and Statistics said last week.
Income tax laws obligate the Ministry of Finance to make adjustments based on the average 12-month consumer price index data ending this month, the accounting firm said.
As of last month, the consumer price index had advanced 4.04 percent to 103.72, from the last revision at 99.69 in 2017, KPMG Taiwan said.
The chances of an upward adjustment are high, if not utterly necessary, the company said, adding that a consumer price index increase of 4 percent would mean an extra deduction of NT$4,000 (US$142.62) from taxable income.
The release of this month’s consumer price index data early next month should shed final light on the matter, KPMG Taiwan said.
Rising inflation also means the government has to allow more leeway for standard tax deductions, salary tax deductions and special deductions for people with disabilities, the firm said.
The last time the government revised deductions was in 2018 and the consumer price index has since grown 3.2 percent to 100.49, it said, suggesting that standard tax deductions should climb by NT$4,000 to NT$124,000, while salary tax deductions and special tax deductions for people with disabilities should be NT$206,000, an addition of NT$6,000.
The new formula would push up taxable income thresholds for different brackets, KPMG Taiwan said.
Furthermore, the government has to make greater concessions on inheritance and gift taxes, as the consumer price index has risen 10.9 percent since the last adjustment in 2009 at 93.49, the company said.
That means the inheritance tax allowance should rise from NT$12 million to NT$13.32 million, while gift tax deduction should grow from NT$2.2 million to NT$2.44 million a year to reflect inflation, it said.
The ministry said it has to wait for this month’s consumer price index data to confirm the need for adjustments and would disclose related figures in December at the latest.
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