The upcoming Cabinet reshuffle would not delay the progress of tax reform, whether the new premier retains or names a new finance chief to lead the reform, Minister of Finance Sheu Yu-jer (許虞哲) told a press conference yesterday.
Premier Lin Chuan (林全) resigned yesterday and the Cabinet is expected to follow suit on Thursday.
The Ministry of Finance on Friday unveiled a major tax reform package that would abolish the imputation tax system for investors, increase the deduction thresholds for personal income taxes and lower the cap on the personal income tax rate.
Photo: CNA
The Cabinet will review, adjust and submit the approved package to the Legislative Yuan, which is expected to begin its new session on Sept. 22, Executive Yuan spokesman Hsu Kuo-yung (徐國勇) said.
According to what would be the largest tax reform in years, the imputation tax system, which awards investors who receive dividends from a company tax credits for taxes paid by the company, will be abolished, Sheu said.
Two proposals have been put forward to replace the imputation tax system.
One proposal would render 37 percent of an investor’s dividend income tax-free, while the remaining 63 percent would be calculated and taxed as part of their personal income.
The other proposal would tax investors a flat rate of 26 percent on their dividend earnings after a deduction of NT$80,000 (US$2,658).
The measures are aimed at easing the burden on investors and bringing the tax system in line with international trends, as most countries that used to adopt the imputation tax system have abolished it, the ministry said.
The new bill would also raise the corporate income tax from 17 percent to 20 percent, which is still lower than the average rates for members of the Organisation for Economic Co-operation and Development and Asian countries, Sheu said.
While the abolishment of the imputation tax system would see a drop of between NT$58.9 billion and NT$59.9 billion in tax revenue, the proposed increase in corporate and dividend income taxes of foreign businesses would create about NT$71.8 billion in revenue, the ministry estimated.
“The measures will not rob the poor to feed the rich, but rob the rich to feed the rich,” Sheu said.
The bill would also lower the cap on personal income tax rates from 45 percent to 40 percent to keep high-income earners in the country, the ministry said.
To ease the tax burden on salaried people and low and middleincome earners, the package proposes an increase in the personal deduction threshold from NT$90,000 to NT$110,000, and the thresholds for both salary and disability deductions from NT$128,000 to NT$180,000.
“That would give middle and low-income households more disposable income,” Sheu said.
Factoring in other minor reform proposals, the total tax revenue would drop by between NT$5.9 billion and NT$6.9 billion, which is within the acceptable range, the ministry said.
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