Regular Mistakes and Negligence When Filing Business Income Tax- part 4 Real Estate Industry in China
Sep 12

United Daily News Sept. 12, 2017
Dr. Hsu, Jen-Hui/ Professor of Dept. of Public Policy and Management, Shih Hsin University, former Deputy Minister of Finance

Former Premier Lin Chuan’s tax reform proposal prior to his resignation has brought into discussions and questions. It is necessary to decipher and figure out the objective and the beneficiaries regarding the tax reform.

Ministry of Finance claims such reform may narrow the wealth gap and redistribute income, elaborating that the rich and the average may severally benefit an estimated 30 billion gain from the tax reduction for dividend income. The average still benefits from more tax deduction and the rich lowering tax rates. The average’s gain accounts for 60 percent out of a total estimated 100 billion from the tax deduction.

This specious interpretation, however, completely ignores the population of both parties. According to the analysis of 2014 income tax declaration data, the number of the rich people declaring their tax rate above 40% is some 47,000, while the number of the average taxpayers is 6,033,000 strong. The declared dividend incomes of the both parties are fairly equivalent, roughly 430 billion dollars respectively, but an average taxpayer gains less than 5,000 dollars from tax reduction for dividend income, whereas a rich one gains up to 627,000 dollars. It is obvious to see who the beneficiaries are.

The highest individual consolidated income tax rate falls from 45% to 40%, from which the immediate beneficiaries are those who declare their incomes over ten million dollars by 45% tax rate, amounting to 12,143 families in 2014. The tax reform will not only reduce their tax rates but also substantially relieve their anticipated tax burden in that partial exemption or discriminatory tax is imposed on dividend income.

Compared the tax payment situations in 2011 with those in 2012 about the declared taxable income higher than 10 million (the 2011 highest income tax rate was 40% and the tax credit of dividend income was 100%), it reveals that the income tax revenue increases from 89.7 billion in 2011 to 169.8 billion in 2012. It is due to not only the increased numbers of the taxpayers but also the tax rates rising to 45% and the tax credit of dividend income decreasing to 50%.

Now the DPP’s tax reform proposal with a lower tax rate on the income and favorable taxation on the dividend income is actually in favor of those “minorities” who are 2 out of 1,000 taxpayers that their income comprises mostly of the dividend income (about 3/4) while wages consist mainly of the income (about 80%) of the general public.

Ministry of Finance plans to raise the corporate income in response to the losses of tax revenue from the favorable taxation on the dividend income. Although the rich people will receive fewer dividends, the general small shareholders’ dividends shrink as well. The rich enjoy the benefits from the tax reduction, while all of the shareholders must bear together the rising corporate income tax! Given that the corporate income tax increases, the decrease in the net profit may result in falling stock prices, lower investment ability and desire, and even pricier products, and all of these are paid by the general public!

written by Good Earth


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