Ma okays free
economic pilot zone plan
REVISED: The CEPD’s new plan would exempt
Taiwanese firms in the zones from taxes for three years, but foreign firms would
be offered fewer tax breaks than in the previous plan
By Camaron Kao, Peng Hsien-chun and Stacy Hsu / Staff reporters,
with staff writer
President Ma Ying-jeou (馬英九) yesterday approved the Executive Yuan’s preliminary
proposal for the free economic pilot zones and expressed hope that the plan
could be finalized by the end of this month.
Ma also instructed the Executive Yuan to establish a promotion task force to
communicate with lawmakers, the media and concerned industries, and submit the
draft of the special regulations for free economic pilot zones (自由經濟示範區特別條例) to
the legislature for review this month.
Ma made the instructions after he was briefed by Council for Economic Planning
and Development (CEPD) Minister Kuan Chung-ming (管中閔) on the proposal at a
meeting at the Presidential Office, which was also attended by Premier Jiang Yi-huah
(江宜樺), Vice Premier Mao Chi-kuo (毛治國) and members of the Cabinet.
Based on the council’s plan, Taiwanese companies will be exempt from taxes on
net profits from their operations in the free economic pilot zones for a
three-year period if they continue to invest in the zones.
Overseas companies, which operate warehouses or process goods in the zones, will
enjoy a business tax exemption on 10 percent of the imported goods and on all
exported goods for three years, the council said.
The president agreed to halve the income tax for employees from overseas working
for companies operating in the free economic pilot zones during the first
three-year period. Those employees would be exempted from tax upon dividend
“In the revised plan, we tried to shift the focus of the free economic pilot
zones to easing regulations, rather than tax reduction,” Kuan said.
The council estimated that the revised pilot zone plan would help boost private
investment by NT$21 billion (US$709 million) and GDP by NT$30 billion next year,
as well as creating 13,000 jobs. Local banks and securities firms are expected
to grow their revenue by NT$30 billion and NT$40 billion respectively, in the
five years after the plan takes effect, it said.
The Ministry of Finance (MOF) and Chinese Nationalist Party (KMT) Legislator
Tseng Chu-wei (曾巨威) are leery of those tax breaks, given the erosion of the
government’s tax revenue income and difficulty of ending such incentives.
Foreign companies operating in the zones that introduce new technologies to the
nation or set up global operation headquarters in the zones would not enjoy
those tax incentives, as had been planned in the previous plan.
“Certain tax reductions may not provide a long-term boost to the economy and can
be canceled, but we still have to reduce certain taxes to the same level as our
trade peers to attract investment,” Kuan said last month.
The council made the announcement yesterday after the Cabinet submitted the
revised plan of the free economic pilot zones to the president and KMT
The government will also allow professionals, including lawyers, accountants and
architects from foreign countries, excluding China, to invest in local companies
or set up local branches with local partners in the zones, the council said.