Addressing Challenges

Is Taiwan's taxation system fair? Should the benefits of economic growth belong exclusively to the "1% who own, 1% who govern, and 1% who enjoy"? According to the Directorate-General of Budget, Accounting and Statistics' "Report on the Survey of Household Income & Expenditure, 2021," data on "disposable income per household" shows that the gap between the top 20% of income earners and the bottom 20% (referred to as the quintile gap) has risen from 5.18 times in 1990 to 6.15 times in 2021. According to 2019 consolidated income tax filing data, the top 10% of households by post-tax income account for 38.36% of total income, while the bottom 10% of households represent a mere 0.46%, with an income gap exceeding 80 times. The low mobility of wealthier families in our country reflects the phenomenon of wealth inheritance.

It's Not Low Tax Rate, It's Inequality

In reality, Taiwan's income tax rates are already high, but tax revenue as a percentage of GDP is disproportionate. In 2022, Taiwan's tax revenue reached a historical high of 14.2% of GDP. However, in 2021, the average figure for OECD countries was 34.1%, for Japan was at 19.8%, the United States was at 20.3%, South Korea was at 22.1%, China was at 21%, and Thailand was at 16.4%. Moreover, the consolidated income tax has effectively become a "tax on labor income." In the same year, among the 6.38 million households that filed consolidated income tax returns, a staggering 49.7% of them were exempt from paying it. In other words, our consolidated income tax is no longer universally applicable.

While salaried workers dutifully pay their taxes, capital owners who make money with money engage in significant tax evasion, exacerbating income inequality. Ko Wen-je advocates for a separate taxation of labor income and capital income to ensure a fair tax burden for all. Simultaneously, we should review outdated taxes like the "stamp tax" and prepare for the impact of international minimum taxation to avoid ceding our taxation rights to foreign entities.

Fair taxation system is the foundation of political integrity and social stability.

Solutions

Revamping the Taxation System to Address Inequity:

1. Our country's social welfare policies include provisions to exclude rich people, with most based on the income amount under the consolidated income tax. However, many forms of individual income remain untaxed (e.g., tax-free securities transactions), leading to incidents like "driving a luxury car while receiving subsidies," which goes against fairness and justice.

2. Convene a "National Taxation Reform Conference" to review and abolish irrational tax systems such as stamp tax and entertainment tax, and identify alternative sources of revenue. Enforce the inclusion of overseas income in the tax system to prevent tax evasion by the wealthy.

3. Review all forms of capital income taxation and shift from a progressive tax rate to separate taxation of income (labor vs. capital). This will ensure a fair tax burden based on income sources.

4. The global tax reform initiated this year requires large multinational corporations to pay a minimum tax rate of 15%. However, many Taiwanese companies' effective profit-seeking enterprise income tax rates do not meet the minimum threshold. Failure to align with international standards would lead to scenarios where corporations either pay extra taxes to foreign governments or face the risk of double taxation, effectively ceding taxation rights to foreign entities.

5. In terms of policy, we must guarantee that the effective tax rate for local businesses within Taiwan is at least 15% to avoid potential tax assessments by foreign governments. We should also expand the existing foreign tax credit mechanism for domestic corporations to include large multinational corporations. Additionally, utilize the extra tax payments made by corporations in Taiwan under the Global Minimum Tax (GMT) as a reserve fund to help them cope with the risks arising from tax reforms, encouraging these corporations to stay in Taiwan. For countries that have already signed comprehensive tax agreements with Taiwan, we should strive to participate indirectly in the global tax reform action through tax treaties to reduce the risk of double taxation for Taiwanese corporations.