Taiwan Proposes Tax Hikes On Banks, Wealthiest Individuals
by Mary Swire, Lowtax.net, Hong Kong
28 February, 2014
Taiwan will introduce a higher rate of income tax and increase the business tax on banks, the Ministry of Finance (MOF) has announced, to increase tax revenues and reduce Taiwan's fiscal deficit.
Even though there remains significant economic uncertainty, the Government has decided it needs to propose immediate action to cut Taiwan's fiscal deficit, which is budgeted, prior to debt repayments, at over TWD200bn (USD6.6bn) in 2014. However, although the total package is expected to raise some TWD80bn in additional revenue, it is hoped the individual measures chosen will not affect recovery in the overall economy.
In particular, the MOF plans to hike the business tax on banking and insurance institutions from 2 percent to 5 percent, to collect additional revenue of up to TWD30bn annually. It was pointed out that the tax was previously cut from 5 percent to 2 percent in 1999 to counteract a regional economic downturn, and that the Government has, since 2001, provided TWD287.5bn as bailout funds to financial institutions with problems.
It was noted that, as a matter of policy, it had been decided to leave alone the securities and investment businesses that are under some pressure in the current market, while the FSC has also promised to support the financial sector this year by further deregulation.
In addition, the MOF has proposed that there will be a new 45 percent income tax bracket for those on the highest incomes above TWD10m per year. It is expected that the consequent 5 percent increase, from 40 percent, will affect around 9,500 taxpayers with annual incomes above that level.
The fiscal package will require parliamentary approval, and it is generally felt that it is unlikely to be approved until much later in the year. Furthermore, while Taiwan's tax-to-gross domestic product ratio is low (at 12.4 percent last year and even below the tax burdens felt in Singapore and Hong Kong) it is still probable that the rise in additional revenue will be watered down before it can be approved.
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