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Ministries still at odds over deferred taxation of bonuses for workers

TAIPEI, Taiwan -- The Ministry of Finance yesterday remained tight lipped over its stance toward the Ministry of Economic Affair's (MOEA) proposal to allow employees to defer payments of tax obligations from bonuses in the form of stock options, with the proposal set to be submitted to the Executive Yuan for review and mediation later this week.

Economics Minister Chang Chia-juch (張家祝) yesterday led a cross-departmental conference with the National Development Council, the Ministry of Finance and the Financial Supervisory Commission, aiming to elevate Taiwan's industries and curb the flight of talent. Topics at yesterday's event included tax reform, the acquisition of capital and the state of venture capital in Taiwan.

On the topic of deferred taxation on bonuses, Wu Ming-ji (吳明機), director-general at the MOEA's Industrial Development Bureau stated that past policies of rendering tax incentives are no longer applicable, and that reforms toward improving tax fairness should be prioritized. Tax fairness is crucial in stimulating job growth and preventing brain drain, stated Wu.

The MOEA proposal is pushing to allow employees to defer tax payments until the liquidation of shares they have received through bonus plans. The proposal has since garnered the support of industries, who say that the move will improve retention of talent and reduce staff turnover.

Motivation for Works Discouraged

According to industry representatives, stock options and other bonus schemes are designed to motivate employees in working toward the long-term prosperity of their company, said Wu. Current regulations, however, burden employees with tremendous tax obligations upon receiving shares through stock options, which may compel them to liquidate holdings immediately while nullifying the design of the bonus plans.

In addition, Wu remarked that current regulations are unreasonable, as the investing public is required to submit tax payments for purchasing shares newly issued by a company while the company's employees are not waived from taxation for purchasing blocks of shares reserved for them.

Tax deferral for bonus schemes discussed at yesterday's event include stock options and company shares received by employees and investors for contribution of vital and proprietary know-how in lieu of equity, in addition to capital increase through the issuing of new shares that are reserved for employees.

The Ministry of Finance, however, did not express their consent to the proposals submitted by the MOEA. Meanwhile, Taiwan's technology sector stated that it will continue its appeal, urging governing bodies to amend the Company Act to allow employee bonus schemes to be included in companies' charters.

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