Taiwan tax reform proposal
Small tweaks
4The Ministry of Finance published its proposal for tax reforms
4The proposal will raise corporate tax (3ppt), reduce top rate of
income tax (5ppt) and raise stock dividend tax for foreign investors
(1ppt)
4Potential impact on growth likely to be limited given small scale of
change
Facts
Income tax
4Increase standard deduction from TWD90k to TWD110k, benefiting 5.17 million tax payers
4Increase Special deduction of income from salaries/wages and Disabled (Handicapped) by
TWD52k, benefiting 5.4 million and 0.62 million tax payers
4Remove the 45% tax bracket (for income over TWD10 million), which makes the highest
applicable rate 40%, in order to retain talent and attract investment
Corporate tax
4Undistributed corporate income tax to be reduced to 5% from 10%
4Raise corporate tax to 17% from 20%
Capital gain tax
4Tax on stock dividend for domestic investors, 37% is tax-free, and rest part of income tax (Plan
A)
4Tax on stock dividend for domestic investors, combine into income tax (Plan B)
Foreign investor stock dividend tax
4Raise from 20% to 21% (in order to close gap with that for domestic investors
Figure 1: Revenue breakdown
Source: CEIC, HSBC
Economics - Data Reactions
01 September 2017
Julia
Wang
Economist, Greater China
The Hongkong and Shanghai
Banking Corporation Limited
+852 3604 3663
juliarwang@hsbc.hk
View HSBC Global Research at:
research.hsbc
Issuer of report
The Hongkong and Shanghai
Banking Corporation Limited
Disclosures &Disclaimer
This report must be read with the
disclosures and the analyst
certifications in the Disclosure
appendix, and with the Disclaimer,
which forms part of it
Figure 2: Tax revenue breakdown
Source: CEIC, HSBC
Link to official statement: https://mof.gov.tw/Pages/Detail.aspxnodeid=137&pid=75744
Implications
Taiwanˉs Ministry of Finance has published a series of tax reforms on its website. Main proposed
changes include lowering income tax (for high earners and increasing deductions), and raising corporate
tax. The reduction in personal income tax should give a modest boost to domestic demand, which
remains sluggish despite the outperformance by the export sector over the past year. Meanwhile, after the
3ppt increase, Taiwanˉs corporate tax rate will now be higher than Hong Kong (16.5%) and Singapore
(17%). But it remains low by global standards, and lower than manufacturing-focused economies such as
Korea (22%) and Mainland China (25%). As such the impact on businesses will likely be small. Overall,
the Ministry of Finance estimate the proposed changes will reduce tax income by TWD5.9-6.9bn,
equivalent to 0.03%-0.04% of estimated 2017 nominal GDP.
There is also a marginal increase in the tax rate for stock dividend for foreign investors. The move is
mainly aimed at reducing the gap in applicable rates between domestic and foreign investors. Proportion
of stocks
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