Taiwan Cuts Corporate Taxes

From the subscription magazine Tax Notes today:

Taiwan’s Legislative Yuan (parliament), in an attempt to attract foreign investors, on May 28 passed legislation cutting the island’s corporate tax rate from 20 percent to 17 percent, retroactive to January 1…

The lower corporate tax rate will make Taiwan more competitive with its East Asian rivals Singapore, whose rate is also 17 percent, and Hong Kong, whose rate remains slightly lower at 16.5 percent.

The reduced rate ‘will make us even more competitive and will help attract international businesses to set up their headquarters in Taiwan. We believe we’ll see the positive results in the next several years,’ lawmaker Alex Fei of the ruling Kuomintang.

If you were the CEO of an international company that made semiconductor chips, laptops, or other manufactured products, would you locate your next plant in the United States – where the corporate rate is about 40% – or Taiwan where it is less than half of that?

Companies build new factories, buy machines, and hire workers in order to earn after-tax profits. Our government swipes twice as much of those profits as the Taiwanese government, so our economy obviously gets fewer factories and machines and lower wages than otherwise. 

The global business environment is changing, and we need to change with it. I’m not sure why that is so hard for U.S. policymakers to understand.

See here for corporate effective tax rates around the world.

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