The cure to deficits is not tax hikes, it is spending cuts. No amount of taxing the rich will exceed the political class’ appetite for spending. If Taiwan goes this direction it will mean a downgrade in the quality of its investment climate in two areas, the steepness of its tax progressivity as the top marginal rate goes to 45%, and also in their business taxation as business taxes go to 5%. Still, you have to marvel that even after they make these proposed hikes, their business rates will still be vastly lower than the US rates.
“TAIPEI—Taiwan’s government, running a deficit budget for the sixth straight year, is considering increasing taxes on high-income earners and financial institutions, as the export-dependent economy is showing more signs of picking up.
Finance Minister Chang Sheng-ford said Monday the government is looking at raising the top rate of income tax to 45% from 40% on individuals whose annual taxable income exceeds 10 million New Taiwan dollars (US$329,161).
Additionally, the administration is considering an increase in the business-tax rate on banks and insurers to 5%, a level it was at before the 2008 financial crisis, from the current 2%. The government is also looking at reducing tax credits individuals can claim if they are subject to both income and dividend taxes.”