From: ccchao@cco.caltech.edu (Chi-chao Chao)
Newsgroups: soc.culture.taiwan
Subject: Re: Thoughts after Minister Wang requested for resignation
Date: 13 Oct 1992 09:24:48 GMT
Organization: California Institute of Technology, Pasadena
NNTP-Posting-Host: alumni.caltech.edu

In article <1992Oct11.050254.3042@nntpd.lkg.dec.com> tsai@tecrus.enet.dec.com (Kuo-Yeang Tsai) writes:
>
>In article <10OCT199221151243@oregon.uoregon.edu>, kuolin@oregon.uoregon.edu (Yeong-Kuo Lin) writes...
>>
>> I don't know, why
>>Mr. Wang don't foucus on some unfair tax policy. For personal impression,
>>he just want to get more, more tax. He don't try to improve some
>>unreasonable tax rule.
>
>Some critic in Taiwan said that Wang was so eager to collect more tax
>to support Premier Hau's 6-year-plan such that that new tax policy was
>not well-studied, well-thought, and well-planned. It seemed to some people
>that the intent to collect more money from the private sector is stronger
>than to materialize the social justice as it seemingly was.
>

The land appreciation taxes all go to local county (or city) governments
not the central government; while most of the expenses for the six-year
national plan will be from the central government.  If Wang wants to collect
more taxes for the six-year plan, he'd better do things on those taxes
which directly go to the central government.  Sorry, this kind of argument
does not seem to work.

For the past two years, the Ministry of Finance has collected several tens 
of billions of tax more than before without creating new taxes.  It is done
by improving the techniques of collecting taxes.  For example, by auditing
several ultra rich families, (e.g., Tsai family, Hou family, ...) last year
the inheritance tax alone has increased several billion (close to ten billion).
Other things he did which incurred a lot of criticism were things like asking small 
stores to use general receipts (Tong3 I1 Fa1 Piao4).  (I have a hard time
figuring out what is wrong to ask them to pay their proper shares of taxes.
Even they are "small" stores; they still make much more money than I do. :-))
But what are the effects of these things on people whose major incomes are from
salaries?  The deduction in income tax has slightly increased (though not much)
and the tax rate is slightly reduced.  Yes, we (people whose major incomes are
from salaries) have paid less taxes since Wang was the minister.
(Currently, tax on salaries constitutes 80% of total income tax collected in 
Taiwan.)

IMHO, ONE OF THE MOST UNFAIR TAX RULES IN TAIWAN IS ABOUT CAPITAL GAINS.  In US,
capital gains are subject to income tax.  While in Taiwan, gains from stock market
are legally tax-free, and gains from real estate are heavily undertaxed especially
for large transactions because the tax is based on the "official assesed value."
The official assesed values are determined by the local land value committee. 
One half of the members in the committee are decided by the county governer (or 
city mayor) and the other half are decided by the county (or city) council.
In reality, the committee is manipulated by local fractions.  They can decide
not only the amount of land taxes ordinary people need to pay but also their
own taxes.  Also the official assesed value is changed once per year, so
any buying and selling made within a year is legally tax-free.  One example
cited frequently is that what Mr. Lin Rong-San (now VP of Control Yuan)
gained from his "Long Shan Lin" project are almost NT$10,000,000,000 (which is
around two times of last year's net profit of Nan Ya Plastic Co., the biggest
private company in Taiwan,) and most importantly, almost no tax, which is perfectly
legal. 

The current system has also been used by tycoons to transfer interests from companies
to individuals.  One common trick is to let the company buy the land in ultra high 
price from an individual and then succesfully transfers the profit from the company
to that individual.  Under the current system, the profit made by the individual
is usually legally tax-free.  Also the large transaction price greatly reduces
the profit of the company, which is very unfair to ordinary stock holders.
For example, in the Hwa Long case, Wong1 Ta4-Ming2 got around NT$ 2,000,000,000 
of profit by this trick in a single transaction.  The above is not a singular case; 
it is quite common in Taiwan.  Others like Rebar group, Evergreen group, ... all have 
done this.  In Sep. issue of "Commonwealth" (Tien1 Hsia4 magazine) you can find 
much more examples.

My wife and I annually make less than 0.01% of what Mr. Lin Rong-San makes.
I have a hard time figuring out how it can be justified that our effective
tax rate is much higher than Mr. Lin's.  Can some netter enlighten me?

Maybe I should go to church to look for fairness and justice. :-)

--
Chi-chao Chao
ccchao@alumni.caltech.edu
ccc@ee.nthu.edu.tw
Newsgroups: soc.culture.taiwan