Taiwan to Scrap Income Tax Exemption for Military Personnel and Teachers

Strategic Insights -

The Taiwanese government has made a significant step towards amending the Income Tax Act by passing an initial review in the legislative Finance Committee, which will affect 340,000 people. The proposed amendment aims to scrap income tax exemptions for military personnel and teachers, resulting in an estimated NT$11 billion (US$349 million) in increased tax revenues annually. The government hopes to implement the changes in 2011.

Key Takeaways:

  • The bill to scrap income tax exemption for Taiwan's military personnel and teachers passed an initial review by the legislative Finance Committee, affecting 340,000 people.
  • The estimated increased tax revenues from the amendment are NT$11 billion (US$349 million) annually, with NT$7.2 billion coming from teachers and NT$3.8 billion from military personnel.
  • The expected increased tax revenues from teachers are lower than previously forecast, with some legislators arguing the government should allocate budget to make up the shortfall.
  • Others have attributed the gap to income tax rate adjustments and opposed additional budget allocations to fill the gap.
  • The Finance Committee has decided to pass the review and send the bill for cross-party negotiations prior to taking it to the legislative floor.
  • Finance Minister Lee said that "an issue that has been left unsolved for a few decades has been dealt with to a certain extent today."
  • The proposal to end the tax exemption has been discussed since 1990 but was previously blocked due to pressure from vested interests and election considerations.

Statistics:

  • 340,000 people will be affected by the proposed Income Tax Act amendment.
  • The estimated increased tax revenues from the amendment are NT$11 billion (US$349 million) annually.
  • NT$7.2 billion of the increased tax revenues will come from teachers.
  • NT$3.8 billion of the increased tax revenues will come from military personnel.
  • The estimated increased tax revenues from teachers in 2005 were NT$9.8 billion.
  • The estimated increased tax revenues from military personnel in 2005 were NT$5.7 billion.

Sources:

  • CNA, "Taiwan to Scrap Income Tax Exemption for Military Personnel and Teachers" on May 11, 2005.
  • Asia Pulse, "Taiwan to Scrap Income Tax Exemption for Military Personnel and Teachers" on May 11, 2005.