President Ma Ying-jeou instructed Premier Wu Den-yih Feb. 6 to fast track the draft Statute for Industrial Innovation that contains a major change to one of its key articles.

The original version, which proposed a preferential business income tax rate of 15 percent for multinational companies who headquarter in Taiwan, will be replaced by 20-percent universal tax at the president’s suggestion.

According to Cabinet insiders, Ma ordered the revision as he believes Taiwan should adopt a universal business income tax without granting special treatment to any particular firms.

Previously proposed by former Premier Liu Chao-shiuan, the 20-percent tax rate will apply to all businesses operating on the island. The move is expected to increase the country’s tax revenues by NT$500 million (US$15.54 million) per year.

Critics of the original statute branded it exclusionary, claiming only four companies met qualifications stipulated in the draft bill. These included AsusTek Computer Inc., Acer Inc., Foxconn Technology Co. Ltd. and Quanta Computer Inc.

The original draft was expected to pass final reading at the last legislative session for 2009 but failed to do so after several legislators came out in opposition. Derided for unfairly favoring companies in the high-technology and innovation sectors, the draft was also labeled a “tax dodge” benefiting specific firms.

Following consultations, the Ministry of Economic Affairs said macroeconomic stability, rather than the business income tax rate, is a major consideration when foreign firms are deciding whether to headquarter in Taiwan. Sources familiar with the matter claimed this was another reason for Ma’s decision.

Separately, Wu said Feb. 7 that the new draft will take into consideration the needs of small and medium-sized enterprises and firms in traditional sectors. According to preliminary MOEA planning, the government will provide NT$10,000 per person in subsidies to companies employing the long-term jobless.

Cabinet officials said the statute will be the Legislature’s top priority during the upcoming session. To expedite passage, the Cabinet will not withdraw its proposal for the amendment, but will instead ask the ruling Kuomintang party caucus to propose the new draft and push it through during the legislative session.

Sources close to Ma said he hopes the statute will help transform Taiwan into a global center for innovation, an economic and trade hub for the Asia-Pacific region, and an operational headquarters for Taiwan-based businesses. These goals are all part of the president’s 2008 campaign platform. (SFC-JSM)

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