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Updated Sunday, September 6, 2009 10:57 am TWN, The China Post news staff

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Taiwan has no luxury for luxury tax

However, is the luxury tax a viable source of income in Taiwan? Is Taiwan's luxury market big enough for the luxury tax to make an impact while competitive enough to retain its customers despite an increase in price?

The government must consider the fact that in terms of luxury goods or even luxury real estate, Taiwan is already facing serious competition in the Greater China area. Hong Kong watch sellers are looking forward to benefiting from a 20 percent luxury tax planned by mainland China. Real estates in major China cities featuring top of the market designs and qualities are attracting residents and dealers alike from all over the world.

Given the increase in convenience of transportation in the Greater China area, Taiwan should weight whether it has the bargaining chip to up the ante or if it's better to use its lack of a luxury tax to draw high rollers in.

The government should also contemplate on what items and how the luxury tax should be levied. The category of items taxed as luxury goods has tended to stay even as the idea of “luxury” has changed over time.

In Norway, chocolate products remain in the luxury tax bracket even through few Norwegians now consider chocolate a luxury good.

Ten years ago, owning a personal computer was seen as a symbol of wealth. 20 years ago a cellphone would have been perceived as a luxury good. Today these products are the backbone of Taiwanese economy. Taiwan's world-class yacht making business is only beginning to find a local market as the government eases maritime laws; a luxury tax on yachts would probably kill this market in Taiwan even before it sets sail.

In other words, when wrongly applied, the luxury tax can push the already export-dependent Taiwan economy even further away from establishing a domestic market.

Luxury taxes on small and movable items such as high-end alcohol, cigarettes, jewelry and fur products may also lead to the increase of smuggling and black markets. Curbing these criminal activities can result in social disturbance and, alas, more spending by the government.

A luxury tax is anything but a luxury, it should only be levied when necessary and only after long and careful planning.

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