Taxation and Economic Development among Pacific Asian Countries

By Richard A. Musgrave; Ching-Huei Chang et al. | Go to book overview

9
Tax Policy and Business
Investment: Taiwan's
Manufacturing Industry

Ching-huei Chang and John Riew


1. Introduction

The effects of various tax measures on private investment have been one of the major issues in public finance. Most previous empirical analyses that use the Taiwan data, which basically follow the Hall-Jorgenson model ( 1967, 1971), indicate that the relative price of inputs has little impact on the level of investment. They generally point to future sales prospects as the primary determinant of investment ( Kiang, 1982; Chang, 1985; Hsu and Chen, 1989). This implies that such measures as investment tax credit or accelerated depreciation allowance cannot be a potent stimulus to capital formation. This chapter is an attempt to reevaluate these findings.

Apart from its academic interest, the result of the present study would be of interest in the ongoing discussion of the merits of the Statute for the Encouragement of Investment (SEI) in Taiwan. 1 Enacted in 1960, the SEI, intended as a stimulus to investment, has since been amended and extended several times. Some have been critical of the SEI as ineffective and inequitable; others have argued that the main elements in the SEI, such as the investment credit and accelerated depreciation, have contributed greatly to the rapid growth of Taiwan's economy in the past and, if retained, could continue to help promote development and expansion of the selected industries.

The chapter is organized as follows. Section 2 is a brief description of the theoretical model from which the estimating equation is derived. Section 3 presents the empirical analysis. The final section is a summary of the results and ends with concluding remarks.

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Taxation and Economic Development among Pacific Asian Countries
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • 1 - Introduction 1
  • Notes 10
  • 2 - Indonesian Tax Reform, 1985-1990 11
  • Notes 41
  • References 42
  • 3 - The Tax System and Economic Development in Japan 44
  • Notes 61
  • References 62
  • 4 - Tax Reform in the Philippines 64
  • Notes 80
  • 5 - Tax Reform in Malaysia: Trends and Options 82
  • Notes 100
  • References 101
  • 6 - Property Taxation as a National Policy Tool in Taiwan 104
  • Notes 116
  • References 116
  • Notes 137
  • References 138
  • 8 - Effective Corporate Tax Rates on Capital Income in Hong Kong 140
  • Notes 153
  • 9 - Tax Policy and Business Investment: Taiwan's Manufacturing Industry 156
  • Notes 165
  • References 167
  • 10 - The International Dimension of Korean Tax Policy 168
  • Notes 191
  • References 192
  • 11 - Tax Incentives for Export Promotion in Japan, 1953-1964 194
  • Notes 207
  • References 208
  • 12 - International Aspects of Income Taxation in Taiwan 210
  • Notes 221
  • References 223
  • 13 - Financing Social Security in Singapore Through the Central Provident Fund 225
  • Notes 255
  • References 255
  • 14 - A New Role for Fiscal Policy and Tax Finance in Korea 259
  • Notes 275
  • References 276
  • About the Book 280
  • About the Editors and Contributors 281
  • Index 283
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