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Bill encouraging pay hikes passes preliminary review

Bill encouraging pay hikes passes preliminary review

Taipei, Oct. 6 (CNA) The Legislature's Economics Committee approved on Monday a government proposal to offer Taiwan's small- and medium-sized enterprises (SMEs) tax breaks if they raise the wages of their lower-paid employees. Differences of opinion remained, however, on many of the details of the bill, and varying versions of the legislation will now be sent for inter-party talks to thrash out a final version to be considered by the full lawmaking body. With Taiwan's average real monthly earnings about the same in 2013 (NT$44,739, or US$1,471) as they were in 1998, the Ministry of Economic Affairs' proposal hopes to encourage businesses to raise wages and break the cycle of stagnant pay faced by Taiwan's workers. The bill, which would amend the Act for Development of Small and Medium Enterprises, would allow SMEs that hand out pay raises to claim more than the actual increase in payroll as an expense when filing their corporate income taxes, thus reducing their taxable income. Under the government's version, SMEs could claim 130 percent of the pay raises as expenses, but some lawmakers felt the 30 percent premium would not provide a big enough incentive to spur a robust round of wage hikes. Kuomintang lawmaker Yang Chiung-ying suggested that SMEs be able to claim 150 percent of the actual amount of the raises as expenses and an opposition Taiwan Solidarity Union lawmaker suggested that SMEs be allowed to claim as expenses double the actual pay increases. Yang, who chaired Monday's committee meeting, decided to send the three proposals to inter-party talks to see if a compromise could be reached. Based on the government's version of the measure, the incentives would only apply to pay raises given to employees earning below NT$50,000 a month and would not apply to companies that simply raise wages to meet minimum wage requirements. Speaking at the Legislative Yuan on Monday, Economics Minister Duh Tyzz-jiun called the measure "an economic lifeline" and said the tax breaks would encourage about one-third of all SMEs, or about 430,000 companies, to raise wages without costing the government tax revenues. Based on the assumption that 430,000 SMEs give their employees a 3 percent wage hike, tax revenues would fall by NT$307 million a year, Duh said.
But those revenues would be recouped through an estimated NT$394 million a year in additional individual income tax revenues and NT$230 million in additional sales tax revenue because of the extra consumption the measure would generate, Duh said. "There will be net benefits," he argued, though the Economics Committee asked Duh's ministry to calculate the net consequences on tax revenues if one of the higher multipliers (150 percent or 200 percent) were used as the main incentives.
Duh stressed that the planned initiative will only be activated when "economic indexes" indicated it was needed. Asked what indexes might be used, Duh said his ministry was considering adopting such factors as the unemployment rate and average salary to determine when the tax incentives would be put in place. "It would not be an annual thing," he said, suggesting that the trigger point for the measure would be an unemployment rate higher than 3.78 percent and no growth in the average wage for an extended period.
Taiwan's seasonally adjusted jobless rate for the first eight months of the year was 4.01 percent. (By Wen Kuei-hsiang and Elizabeth Hsu)


Updated : 2021-06-14 17:20 GMT+08:00