Legislative committee approves anti-tax evasion bill
The legislature’s Finance Committee yesterday approved an anti-tax evasion bill, which, if passed into law, would subject all companies registered overseas to the 17 percent corporate income tax.
While supportive of the legislation, the committee voted 7-5 in favor of allowing the Cabinet to set the implementation date to avoid a repeat of the capital gains tax on stock investment fiasco, in which the government had to water down and eventually scrap the controversial levy after it weakened the local bourse.
“Timing is important for successful implementation of any law, and it is better to wait until the ministry draws up supporting by-laws to minimize unfavorable effects on the parties involved,” Minister of Finance Sheu Yu-jer (許虞哲) told a news conference.
First introduced in 2014, the anti-tax evasion bill gained renewed support following the “Panama Papers” leaks in April that showed how a Panama-based law firm, Mossack Fonseca, helped its clients avoid taxes and skirt financial oversight.
The firm has about 16,785 Taiwanese clients, both individuals and enterprises.
The legislation would extend the corporate tax to foreign firms with management offices in Taiwan.
The legislation aims to address the long-standing issue of tax base erosion and profit-shifting by companies registered overseas.
Some of those companies came into being due to a ban on direct investment in China, but most of the rest purely seek to take shelter in tax havens such as the Cayman Islands and the British Virgin Islands, among other places.
The ministry expects the legislation to generate extra tax revenue of between NT$6 billion and NT$7 billion (US$186.2 million and US$217.2 million) per year.
Lawmakers from across party lines lent weight to the legislation, but voiced concerns it might trigger capital outflows in the absence of supporting by-laws.
Sheu said that the ministry would draft an amnesty clause that would spare from the legislation firms with substantial foreign operations or insignificant earnings.
More discussions and clarifications are necessary before the legislation goes into effect after it clears the Legislative Yuan, Sheu said, adding that it is not a tax hike and would be a factor in the nation’s economic health.
Domestic banks’ offshore banking clients might bear the brunt of the proposed legislation’s effects, resulting in an indirect effect on financial institutions, Sheu said.
The ministry will consult relevant parties and brief the legislature on its progress in six months, he said.
The ministry is to next focus on revising personal income taxes to help the nation retain and attract talented professionals as part of an attempt to restructure the economy, Sheu said.
