By Ted Chen ,The China Post
TAIPEI, Taiwan — Designed to improve the government’s fiscal condition, a proposed tax reform package is scheduled to begin its review process by lawmakers at the Legislative Yuan this Thursday.
The initiative is expected to increase tax revenues by NT$80 billion by levying additional obligations on the wealthy, the investing public and the financial sector, while providing tax reductions for the disabled, wage earners, companies with an emphasis on research and development and enterprises that are committed to hiring more employees and expanding payrolls.
In addition, on Thursday the Legislative Yuan’s Finance Committee will be reviewing amendment drafts on relevant clauses of the Income Tax Act and the Value-added Business Tax Act submitted by the Executive Yuan. According to reports, consensus is high among involved governing bodies, with the completion of the approval process expected in the first half of this year.
Upon the approval of the tax reform package, the financial sector will be subject to a higher business tax starting the following month. In addition, tax increases on the wealthy and reduced dividend income deductible amounts are expected to take effect in January of next year.
Meanwhile, tax reductions included in the proposed reform will also take effect next year, with eligible individuals and enterprises poised to benefit tangibly when the previous year’s taxes are filed in 2016.
According to the Ministry of Finance, the tax reform is designed to reduce the government’s reliance and use of debt by raising additional revenues through taxes. In addition, the reform aims to improve tax justice and reduce wealth disparity while promoting employment, research and development among the private sector and stimulate economic growth.
The Wealthy to See a 45-Percent Tax Rate Specifically, according to the draft submitted by the Executive Yuan, preliminary changes brought on by the tax package will be focused on hiking the tax imposed on the wealthy.
High-income households will be classified into six incremental tax brackets. Households with incomes exceeding NT$10 million will be subject to the highest bracket with a 45-percent tax rate. The change is expected to yield an additional NT$9.9 billion among the 9,500 households meeting this criterion.
Secondly, tax-deductible amounts for dividend payouts will be halved from 100 to 50 percent.
Last of all, the business tax for the financial sector will be reverted back to 5 percent, from the current 2.5 percent, with the move expected to yield an additional NT$20 billion in tax revenues. Tax reductions stipulated by the reform include special deductibles of up to NT$128,000 per individual for the disabled, while enterprises that commit to hiring more employees can use 130 percent of payroll expenses toward tax deductions. In addition, companies with an emphasis on research and development may attribute 10 percent of relevant expenses toward tax deductions, extendable by three fiscal years.