Country Rankings - Taiwan
Nov 03, 2017 Taiwan: contraryAnother interesting case this week is Taiwan, which is bucking global tax trends by raising corporate tax and cutting the top rate of income tax. At a time when the direction of corporate tax rates is firmly down, Taiwan is putting up its corporate tax, by three percent, which is a relatively substantial hike in the context of a highly competitive global corporate tax environment. On the other hand, a post-hike rate of 20 percent is still below the world average of approximately 23 percent, so Taiwan perhaps has more scope than others to pull the corporate tax lever to raise additional revenue. However, it remains to be seen what sort of signal this sends to investors. Taiwan is in a similarly advantageous position as New Zealand, with generally favorable rankings in the international competitive league tables; it is just one place behind New Zealand in the Doing Business Index. Only time will tell if this turns out to be a risky move from a reputational point of view in such a cut-throat environment. Controversially, Taiwan has also cut the top rate of income tax at the same time as raising the rate of corporate tax. It is a strange combination of tax measures, especially given that the top rate of personal tax is generally a political cause célèbre: cut it and hear the left howl about fairness (or the lack of it) and injustice; raise it and watch the right predict an exodus of investors and skilled workers and economic disaster. Perhaps the two tax measures are calculated to cancel each other out. Or maybe it is hoped that a five percent cut in the top rate of personal tax more than compensates for a three percent corporate tax hike in the eyes of the investment community. Either way, it is difficult to determine whether these moves are brave or foolhardy.
Mar 21, 2017 Taiwan: confrontationalThere are many alternative phrases to describe the sharing economy. One of them is the "collaborative" economy. Collaboration seems to be in very short supply, however, when it comes to the taxation of the companies and individuals involved. It seems that the attitude of many tax authorities when confronted with new ways of doing business in the digital economy is to tax first and ask questions later. Indeed, in many cases, they just tax, and don't bother with awkward questions. Uber's business model seems to be a particularly challenging one for traditional tax regimes. Uber insists that its drivers provide "ride-sourcing" services, rather than traditional "taxi" services. Many governments, on the other hand, beg to differ, which puts Uber drivers and the company itself in a very uncertain position with regards to tax and regulation. It's at this point I would like to single out Estonia as a shining example of how things can be done. Back in 2015, Estonia's Tax and Customs Board (MTA) and Uber decided to establish a working group to discuss the best way forward on tax. It was an approach, said Enn Mestar, CEO of Uber Estonia, that marked the MTA out as "a far-sighted and innovative public authority." Now that's something you don't hear very often! Unfortunately, most tax authorities are still taking a confrontational, rather than a collaborative, attitude to the collaborative economy, like Taiwan, which recently went as far as freezing Uber's assets in the country, in the latest step in a long-running tax dispute between the company and the Taiwan tax authority. So perhaps "sharing economy" is the more accurate term to use after all. Because tax authorities are showing little inclination to collaborate with taxpayers, but they still want their share.
Jul 11, 2013 Taiwan: cozy up to the dragonWhile favorite son Hong Kong powers ahead with reinventing itself as a regional financial hub, Mother China shows its true intentions by energetically pursuing trade deals which would have been unthinkable a decade ago. Last week good progress was said to have been made in FTA negotiations with arch-rival South Korea; and as a follow-up to the Economic Cooperation Framework Agreement between Taiwan and Mainland China, the two sides have now also concluded a long-awaited cross-strait agreement for trade in services. Taiwanese Premier Jiang Yi-huah said he looked forward to it providing a further impetus to closer business relations with the Mainland, and leading to further agreements on, for example, dispute settlement and double taxation, while also underlining Taiwan's commitment to trade liberalization and for it to take part in the on-going regional economic integration through more, what he called, "free trade agreements." Taiwan is to open up 64 sectors to mainland China, including banking, insurance, health services, securities broking, technical certification and analysis, and tourism. In like manner, the Mainland is to lower the threshold for market access to Taiwan investment in 80 sectors covering banking, insurance, securities broking, e-commerce, technical certification and analysis, and transportation. Fraternization between China and Taiwan, welcome as it is, can be seen as a part of domestic politics; but if China really means to strike a trade deal with South Korea (which would one day surely include North Korea), then this really is a signal of opening-up on a par with China's WTO membership. Add in Japan (also being talked about) and you are looking at an Asian single market to outclass the creaking, uncompetitive, introspective European single market.
Mar 21, 2013 Taiwan: cuts a taxIt could never happen in Old Europe: the Taiwanese are planning to encourage more derivatives trading by halving the transaction tax they place on stock market futures. For Europeans, derivatives are on a par with bigamy or sheep-stealing. Of course, the Taiwanese should never have had such a stupid tax in the first place, but they do now seem to have come to a realization that derivatives trading calms volatility, generates employment and is good for the economy. There have been any number of academic studies showing exactly that; but if you believe the earth is flat, even a trip to the moon to look back at it won't convince you otherwise.
Feb 07, 2013 Taiwan: is Chinese and so is TaiwanIf the long-lasting and far-from-resolved enmity between Mainland China and Taiwan is a cup half empty, the progress being made with their ECFA (Economic Cooperation Framework Agreement) is a cup half-full. The thing itself was quite surprising when it happened, and subsequent attempts by both parties to implement it and even extend it have been quite reassuring, especially in a region which is subject to multiple cross-border tensions, second perhaps only to the mid-East in terms of scariness. Between them, China, Japan, the Koreas, Myanmar, Vietnam, Laos and Thailand have more hatchets than you shake a stick at. In fact, it has been a good week on that front, with Japan actually sidling up to China in a more-or-less friendly fashion. Chinese Taiwan, almost-Chinese Singapore and even more so, Chinese Hong Kong stand out for being focused on business rather than national rivalry. I know it's heresy to say so, but wouldn't Taiwan be better off if it had Hong Kong's freedoms within a Chinese envelope, so to speak? The Mainland is moving at a glacial pace towards permitting full democracy for Hong Kong; wouldn't it make sense for Taiwan to agree to say a 20-year process of re-integration into China, with all the reassurances that Hong Kong has of economic independence? Taiwan's economy would benefit enormously. So what stops it?
Nov 15, 2012 Taiwan: reduces a tax you never heard ofTaiwan is hoping to bring in an extra half a billion dollars (sounds good, but it's only USD17m) by reducing a transaction tax on some obscure type of stock market instrument. Have you heard of risk-hedging warrants? No, nor have I; but what's important is they seem to have cottoned onto the (correct) idea that in taxation less is more, ie that there is a level of tax which people will happily pay rather than going to the trouble of getting out of it through some contrivance or other. In this case perhaps there are untaxed risk-hedging warrants in Singapore, or maybe the tax makes it not worth your while to hedge the risk at all. Evidently the equation of less = more only works up to a point: the step from some to no tax is not successful!
Aug 16, 2012 Taiwan: hungers for international recognitionIf Taiwan is interested in joining the Trans-Pacific Partnership, that is certainly a sign of openness to trade on the one hand, and it is difficult to doubt that Taiwan lives or dies by trade, much more than some other countries, but it is also to be seen as a move in the long-running multilateral diplomatic chess-game being carried on between Taiwan, Mainland China, the USA and other interested Asia-Pacific parties. China itself is playing in order to re-absorb Taiwan into its imperial orbit, and can point to its acceptance of Hong Kong's free-wheeling, free-trading quasi democracy as proof that it can be a flexible partner. But progress in re-establishing trading or any other kind of relations between China and Taiwan has been glacial, even if the two 'partners' did sign a long-delayed investment protection agreement this week. This is a show that will run and run. Meanwhile Taiwan's continued independence is a beacon of hope and encouragement to China's own would-be democrats.