Taiwan Taxes

Not surprisingly, the pro-DPP Taiwan News supports Chen's mooted tax increase. Similarly, according to a Taiwan government web site,

...the president said that the government needed to press harder to realize fiscal reform in order to promote social fairness and justice, improve government finances and promote economic development.

Chen said that Taiwan's national taxation rate is "too low" when compared to the average of 27 percent in the member countries of the Organization of Economic Cooperation and Development...

In his successful campaign for the March 2000 presidential election, Chen followed the advice of tax scholars and floated the proposal for the revival of the securities transaction income tax, but backed away from the suggestion after intense media criticism and anger from individual investors.

The pro-DPP Taipei Times's Tax-reform plan sparks heated debate By Jackie Lin

The national taxation rate is a gauge of a nation's tax burden divided by its GDP. Taiwan's tax requirements pale in comparison to those of members of the Organization for Economic Cooperation and Development (OECD), whose national taxation rate is about 27 percent.

...Chen said the value-added tax should be raised in the near future by 2 to 1 percentage points from the current 5 percent, a minimum tax scheme should be imposed and inheritance and gift taxes should be trimmed from 50 to 40 percent to boost investment.

These measures, however, have been widely criticized as robbing the poor and giving to the rich. Increasing the value-added tax rates would be reflected in commodity prices, so this is seen as a hidden tax on the general public.

Although the prices of some products might be hiked after the new regulation is put in practice next year, manufacturers' tax costs may not be entirely transferred to consumers due to fierce competition, the Ministry of Finance said.

Furthermore, daily necessities such as fresh food, agricultural products and rice are exempt from value-added taxes and won't be affected by the new measure, the ministry said.

However, People First Party Legislator Christina Liu (劉憶如) said levying a value-added tax across all kinds of products does not conform to social justice.

She suggested that luxury goods be charged a higher tax, and that consumer products that are used on a daily basis, such as medicine, should be free from the tax.

Meanwhile the pro-KMT China Post cites Liu at more length:

Christina Y. Liu, a second-term PFP lawmaker, said the president simply cannot increase tax on the one hand and continue to borrow on the other.

She referred to a US$18 billion arms purchase from the United States, which will be financed by the borrowed money.

Moreover, Liu said, the government can easily raise the tax revenue by NT$30 billion or NT$40 billion, if the economy is kept growing by two percent a year.

"There's no need whatsoever for the government to increase tax," said Liu, who used to teach finance at a university.

Of course, if the KMT were making the proposals, the show would be on the other foot. Anyway, Forbes believes that low taxes are good, and there is no reason to raise them; see their Tax Misery & Reform Index

(click for larger pic)