Taxation and Economic Development among Pacific Asian Countries

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

by domestic corporations would result, potentially discouraging outward investments. Also, individuals as well as domestic corporations would be encouraged to make direct foreign investments. This issue presents a conflict between domestic policy objectives and international efficiency, a conflict that cannot be resolved unilaterally by adjusting domestic tax policy. Another point to be considered is the effects of adjustments in tax policy on investment in other developing countries. In keeping with the policy of tax neutrality, nontax measures such as information collection and risk insurance should have more practical value than tax incentives. In the case where tax incentives are introduced, provision for a reserve for overseas investment loss should be made or tax deferrals should be granted to direct investment.


5. Conclusion

The basic proposition of this chapter is that, following recent economic development, particularly foreign trade expansion, Taiwan has become a net capital-exporting country, and the corresponding adjustment of tax policy requires that the international aspects of taxation be an integral part of the wholesale reform of the current tax system.

Along with the required adjustment of domestic tax policy, four major changes in the international income taxation of both business and individual entities are suggested: (1) tax the income of residents on a worldwide basis; (2) tax the income of foreign subsidiaries of Taiwanese corporations located in low-tax jurisdictions on an accrual basis and allow direct and indirect foreign tax credits while exempting foreign-source income of operations located in high-tax jurisdictions; (3) apply a single withholding tax rate to all forms of income accruing to nonresidents; and (4) levy an extra tax on the profits expatriated by the local branches of foreign corporations. Because this chapter focuses on fundamental design concepts, for further understanding it is also suggested that empirical studies on the effects of domestic tax policy on capital flows be made.


Notes

Although this chapter is based on the Report of the Tax Commission, Ministry or Finance, ROC, the views expressed should not necessarily be identified with those of the commission.

1.
Based on the total foreign exchange reserve, excluding gold, Taiwan ranked third behind Japan and West Germany. Besides, there is also a huge gold stock in Taiwan, valued at US$5.94 billion in August 1989. See Financial Statistics, Taiwan District, compiled by the Central Bank of China, ROC, September 1989.
2.
The NT appreciated from NT$39.85 per US$1 at the end of 1985 to NT$25.90 per US$1 in June 1989.

-221-

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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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