A Study on Corporate Alternative Minimum Tax
Date Issued
2005
Date
2005
Author(s)
Hung, Jui-Lung
DOI
zh-TW
Abstract
In January 1998, Taiwan adopted the imputation tax credit system to eliminate double taxation on business income, and a 10% surtax on corporate undistributed earnings was also introduced to compensate possible tax loss from the tax system transition. However, the surtax has been widely criticized for its laborious calculation process, inconsistency with financial accounting and disturbance on corporate dividend policy ever since. Meanwhile, excessive amount of exempt income and investment tax credit has put Taiwan’s public finance in trouble. Many tax reform plans are proposed, and alternative minimum tax system (AMT) has emerged as the most promising one. The thesis makes a thorough study on American corporate AMT to see if a similar tax system like AMT is worth introducing in Taiwan to address the tax issues mentioned above.
The thesis concludes that a similar tax system like AMT can overcome several drawbacks in the current tax system. By including exempt income in the AMT tax base and controlling total amount of investment tax credit, inequity in income tax burden among different industries decreases. And with proper tax rate set, AMT seems to be a competent substitute for the 10% surtax on corporate undistributed earnings.
Based on tax return data of 1998 and 1999, the thesis goes on to conduct an AMT simulation. A roughly 14% AMT tax rate is found to compensate tax loss from the supposed abolition of the 10% surtax on corporate undistributed earnings. Further analysis reveals that the financial industry may be the biggest winner from the possible tax reform, while the high-tech and manufacturing industry may suffer most.
Subjects
最低稅負制
兩稅合一
未分配盈餘稅
租稅優惠
投資抵減
corporate alternative minimum tax
imputation tax credit system
surtax on undistributed earnings
tax preferences
Type
other