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China Times: Breaking myths about taxation
Central News Agency
2012-02-24 11:54 AM
President Ma Ying-jeou recently said that achieving equitable distribution of wealth will be his top priority in the next four years. He said the government will adopt the ability-to-pay principle in taxation, making sure that people with higher incomes pay more taxes. In promoting a new wave of tax reforms, the government needs to break the many myths surrounding taxation. The first one is the notion that a high tax burden will send businesses and rich people out of the country. In fact, taxation is only one of the factors, not even the most important one, considered in investment assessment. Other factors include the availability of natural resources, production environment, government efficiency and culture. The second myth involves the idea of imposing a new tax targeting wealthy people. The "rich people tax" in question is not meant to be a new tax. It is intended to correct areas in the tax system that tilt in favor of the rich and make sure that all items that ought to be taxed are taxed, such as profits from stocks and real estate. As a matter of fact, these capital gains are subject to taxes in the United States and Europe. Taiwan is among the few countries that exempt them from taxes and should act immediately to plug the unreasonable tax loophole. The third myth is the belief that a capital gains tax on securities transaction is not suitable for Taiwan. In the United States, for example, capital gains from securities transaction are a taxable item for income tax, with the tax rates reaching up to 35 percent for trading occurring within the first year of holdership and 28 percent after that. The levy has not stopped the Dow Jones Industrial Average from reaching 10,000 points. By comparison, Taiwan's stock index once dropped to below 4,000 points even without such a levy. This demonstrates that a capital gains tax has nothing to do with the ups and downs of the stock market. In addition, the mechanism of capital loss carryover is favorable to individual investors. So why shouldn't those big fish pay more taxes? Over the years, the government has held many tax reform meetings and heard numerous suggestions and results of studies on the capital gains tax. But at the end of the day, the idea was invariably shelved because the government lacked the determination and ability to make the change. Let's come together and monitor the government to see how strong Ma's determination is. (Editorial abstract -- Feb. 24, 2012) (By Y.F. Low)
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