Increased individual tax breaks proposed

The China Post news staff

TAIPEI, Taiwan — To help taxpayers cope with shrinking real incomes and rising commodity prices, the Chen Shui-bian Administration yesterday approved increased deductions for individual taxpayers that, if ratified by lawmakers, will take effect for the 2008 tax year and reduce the government’s tax revenues by NT$3.7 billion (US$112 million) annually.

Drafted by the Ministry of Finance (MOF), the revised Income Tax Law will raise salary deduction for each wage earner by NT$4,000 to NT$82,000 and increase the deduction for a physically or mentally challenged dependent by NT$5,000 to NT$82,000.

In addition, taxpayers can deduct up to NT$25,000 for each dependent studying in a college or university instead of just NT$25,000 per household under the current tax law.

To prevent taxpayers from deducting questionable donations, the bill stipulates that only donations made in cash would be eligible for tax deductions.

Premier Chang Chun-hsiung said the new rules are aimed at alleviating taxpayer’s financial burden and ensuring equality in paying taxes. Of the NT$3.7 billion in lost tax revenues, MOF officials attributed NT$1.7 billion to the salary deduction, NT$200 million to the deduction for physically or mentally challenged dependents, and NT$1.8 billion to the deduction for educational expenses. The proposed increases, however, is also projected to increase the government’s revenues by NT$3.5 billion per year, bringing the net loss in revenue to just NT$200 million (US$6 million) per annum. MOF officials forecast that the proposed amendment will lessen the tax liability of members of the middle class, prevent tax evasion, and lower the operation costs of enterprises.