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MOF rules out luxury goods tax

TAIPEI, Taiwan -- Finance Minister Lee Sush-der assured foreign investors yesterday that there were no plans to impose a special tax on luxury goods.

Speaking to the foreign business community at the January Monthly Members' Luncheon hosted by the European Chamber of Commerce Taipei (ECCT), Lee said that while a tax on luxury goods had been considered, it would be "impossible" to implement in the current economic climate.

Furthermore, while he did not rule out more taxes related to energy consumption, he said that the issues are still being studied and it could be two to three years before action is taken. Moreover, the minister stressed that the purpose of tax reforms and other initiatives related to environmental protection would be to encourage the reduction of energy usage and greenhouse gas emissions and not to boost government coffers.

The minister's comments were made in response to questions raised by ECCT members at today's luncheon. The ECCT's Luxury Goods committee has since July last year been petitioning the government not to impose an additional tax on luxury goods, arguing that such a tax would hurt not only luxury goods retailers but also the wider travel and tourism industry, which is already reeling from the global slowdown. The committee has also argued that a luxury tax would ultimately be counter-productive in that it would discourage spending in Taiwan in favor of other tourist destinations such as Hong Kong.

According to the committee's reasoning, higher taxes on certain items would not be able to offset the impact from an overall drop in purchases of luxury goods, meaning that overall tax revenues on luxury goods would drop if such a tax were to be imposed.

Minister Lee also answered a question on speculation about possible increases in taxes on energy consumption. Lee replied that currently there are 13 different types of taxes related to energy and the environment covering cars, petrol, pollution and a range of other items. Lee admitted that the system is overly complicated and needs to be reformed and various taxes should be consolidated.

While he did not give specifics as to how this would be done, he stressed that the purpose of reform efforts would not be to increase tax revenue but to change consumption habits and patterns to reduce energy consumption, protect the environment and cut CO2 emissions.

In this regard, the Ministry of Finance (MOF) in conjunction with other ministries including the Ministry of Economic Affairs (MOEA) is studying various proposals for tax and non-tax instruments to bring about change. Lee said that it could be two to three years before changes would be introduced.

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