A Study on the Issues Concerning Abolishing the Statute for Upgrading Industries
Date Issued
2008
Date
2008
Author(s)
Luo, Ching-Hui
Abstract
On the expiration of the Statute for Upgrading Industries at the end of 2009, the Ministry of Finance is considering various revenue-neutral tax reform acts while abolishing the code comprehensively. This study first analyzes the filing data of business income tax for 2004, and finds that the tax relief provided by the Statute for Upgrading Industries benefits mostly highly profitable businesses and certain industries. As a result, the principle of taxation equity is substantially impaired. This study constructs a general equilibrium model under the assumption of small open economy and explores the effect of various tax reform acts proposed to replace the Statute for Upgrading Industries on economic efficiency and income distribution. This paper shows that: (1) Abolishing the Statute for Upgrading Industries alone will reduce domestic output but improve income distribution. (2) Abolishing the Statute for Upgrading Industries and cutting down business income tax on condition of revenue neutral will reduce the extent of both the domestic output reduction and the improvement of income distribution. (3) Abolishing the Statute for Upgrading Industries and replacing the existing consolidated system with partial-dividend-exemption system while cutting down business income tax on condition of revenue neutral will boost domestic output but worsen income distribution.
Subjects
Statute for Upgrading Industries
tax relief
general equilibrium model
small open economy
revenue neutral
dividend-exemption system
Type
thesis
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