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EDITORIAL: Time to
talk turkey on taxes
Taiwan faces a rising national deficit and increasing government debt, so it is
reasonable that the government proposes new taxes. However, the government has
reiterated that it has no plan to re-impose a capital gains tax on investment
income, be it from stock or property sales. This shows it is still not ready to
create a fair taxation environment.
On Thursday, the Chinese-language United Evening News reported that President Ma
Ying-jeou (馬英九) had allegedly discussed with Minister of Finance-designate
Christina Liu (劉憶如) potential adjustments to the nation’s tax system, including
the introduction of a capital gains tax on investment profits.
Although it was just media speculation about the “possibility” of such tariffs,
both Liu and Financial Supervisory Commission Chairman Chen Yuh-chang (陳裕璋), as
well as Presidential Office officials, immediately said the report was
inaccurate. They said the matter was still under consideration and there was no
rush by the government to implement a capital gains tax without consulting the
public.
The question is whether the immediate denials reflected the market’s anxiety
over the government’s plan to address the tax exemption on capital gains — one
of the most contested issues in the nation’s tax system — or if the reaction
showed officials’ fear of repeating the experience of Shirley Kuo (郭婉容), whose
announcement of a capital gains tax on securities transactions in 1988, when she
was minister of finance, caused the stock market to plummet for 19 consecutive
days, or that of Wang Chien-shien (王建煊), who quit as minister of finance in 1992
because he wanted to levy the land value increment tax based on the actual
transaction price rather than the officially assessed land value.
Of course, reform is painful and tax reform especially hard. That is why tax
experts, academics and the media have been discussing the idea of capital gains
tax on and off since the government shelved the capital gains tax on securities
in 1990. The good news is that through the years, an increasing number of people
have been willing to consider the idea that investors could pay tax on capital
gains, but deduct investment losses from taxable income.
The occasion of the appointment of a new finance minister is a good time for a
serious discussion of how to promote a more equitable society through fairer
taxation, including the capital gains tax.
On Friday, Liu said that once she assumes her new post, she plans to convene a
national tax reform committee to draft new tax policies. Liu also said she
welcomed suggestions to improve the nation’s financial health, but she made
clear that she would not impose a capital gains tax on securities transactions
during her term. If Liu meant it and if the government were to deliver on its
promise of narrowing the gap between rich and poor, then a capital gains tax
deserves public discussion, like a windfall tax or other measures that can
enlarge the nation’s tax base and promote fairer taxation rates.
Even so, the idea of convening another national tax reform committee could
terrify many people, as not long ago a similar tax reform committee publicly
criticized itself as being nothing but a rubber-stamp body for the government’s
tax-cut policy, and for helping to widen the nation’s wealth gap and increase
government debt.
Whatever options are discussed by the committee and regardless of what
conclusions are drawn, the key issue is the government’s determination to
implement tax reform. What people need are officials who are professional enough
to stand up to political pressure, rather than a government that simply talks
but does nothing.
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