Taiwan Approves "Rich Man's Tax" to Narrow Wealth Gap

To narrow the wealth gap, Taiwan's legislature has recently approved a taxation reform proposed by the Ministry of Finance (MOF) to raise the ceiling tax rate to 45% from the current 40% on those with annual net income exceeding NT$10 million (US$333,333), with some 9,500 people likely subject to the so-called “rich man's tax.”

The taxation reform, reportedly to be effective in 2015, also includes business tax hikes on banks and insurers with higher tax rate to 5% from 2% as well as tax deductions for low-income families, people on fixed salary, and  disabled, to benefit some 80% of taxpayers.

Taiwan's families in the bottom five percentile reported average annual income of NT$48,000 (US$1,600), compared with NT$4.63 million (US$154,333) by the top five percentile in 2011, based on income tax filings.

Observers blame the widening income gap as one of the main reasons for increasing social unrest that includes frequent reports of murders, suicides, violence and various white collar crimes. Finance Minister S. F. Chang says the rich man's tax aims to even income distribution.

The taxation reform is expected to generate an extra NT$80 billion (US$2.67 billion) a year to enhance governmental finances, Chang adds. (JL)