Comments onChen Tin-An’s Paper
on Taxation System of Taiwan
Eiji Tajika
School of International and Public Policy
Hitotsubashi University
January 26, 2007

School of International and Public Policy,
Hitotsubashi University

1Outline of comments
 Unique elements of Taiwanese Tax System
 Tax revenue in macro-economic context
 Where to fix and how?
 Further issues to think about

School of International and Public Policy,
Hitotsubashi University2

Unique elements of Taiwanese Tax
System: to retain or to abolish?
 Complicated taxes on consumption andcommodities
VAT (Business Tax)+ Commodity Tax (onseven items) + Special consumption-typetaxes (on tobacco, liquor, gasoline andothers)

School of International and Public Policy,
Hitotsubashi University3Unique elements of Taiwanese Tax
System: to retain or to abolish?
 Various exemptions and preferentialtreatments
Industry-promotion measures continue, andthe loopholes made the AMT (alternativeminimum tax) necessary, which has resulted
in more complicated situation.

School of International and Public Policy,
Hitotsubashi University4Unique elements of Taiwanese Tax
System: to retain or to abolish?
 Businesses of the self-employed and thepartnership are under profit-seeking
enterprise income tax (PEIT: 営利事業所得税）＝＞
Income of owners of the self-employedbusiness (sole-proprietor) and partners istaxed twice at the business and household
levels.
School of International and Public Policy,
Hitotsubashi University

5Unique elements of Taiwanese Tax
System: to retain or to abolish?
 Complicated land-related taxes

Land-value increment tax
Land-value tax
House tax
Agricultural land tax (suspended since 1987)
Î
Different values of assessment, which is widely
off from market values
School of International and Public Policy,
Hitotsubashi University6

Tax revenue in macro-economic context
 Low and declining tax revenue

Peaked 20.1% in percent of GDP in 1990, anddeclined sharply after the Asian Economic
Crisis, and now at around 13%
How the government can manage its
spending? Privatizing state-owned
enterprises, or issuing the public bonds?
School of International and Public Policy,
Hitotsubashi University

7

Where to fix and how?
 Consumption-related taxes

Why don’t integrate various taxes on
consumption by the VAT?
Taxing additionally on energy isunderstandable to deal with environmentalproblems.
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Hitotsubashi University

8

Where to fix and how?
 Broadening the tax base

Where exactly to be broadened in either
personal and corporate income tax, and how
this contributes to cutting tax rates?
Can the base-broadening abolish the AMT?

School of International and Public Policy,
Hitotsubashi University

9

Where to fix and how?
Capital-income taxation
Imputation system with 10% surtax on retained
No tax on capital gains from stocksÎIs this an idea of efficient tax on capital?
Isn’t, rather, the imputation system now a fading-out
tax, and simpler taxes, say dual-income tax, arecoming in?
The “unique” taxation on the self-employed andpartners continue? If it is to be changed, how?
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Hitotsubashi University

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Further issues to think about Personal income tax

How is the burden from social-security
contribution in comparison of the personal
income tax? Isn’t it necessary to thing the twoburden simultaneously, especially for the
young generation?
How is the income distribution problem in
Taiwan? Widening inequality matters now?
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Hitotsubashi University11

Further issues to think about Corporate income tax

Now, the tax rate 25% of Taiwan is not very
attractive; China will set the same rate, andother Asian countries smaller rates.
Which special measures can be slashed tobroaden the tax base for the substantial ratecut?
School of International and Public Policy,
Hitotsubashi University

12Further issues to think about Reforming land-related taxes(nicely discussed by Professor Chen) Taxes of the central and local governments

Is the current division of taxes appropriate?
And other problems?

School of International and Public Policy,
Hitotsubashi University

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