Taiwan pay raise bill passes 1st legislative review

2014-10-08

An amendment paving the way for pay increases and promoting employment and private investment passed first review by the Legislature’s Economics Committee Oct. 6 in Taipei City.

“Changes to the Act for Development of Small and Medium Enterprises represent the government’s response to stagnant wages and aggressive talent hunting from neighboring economies,” Minister of Economic Affairs Duh Tyzz-jiun said.

“We expect the move to create a positive cycle for Taiwan’s economy by boosting private consumption. It will also level the playing field for SMEs, which were excluded from tax incentives given their limited scales of operation.”

Under the bill, if Taiwan’s jobless rate remains above 3.78 percent for six consecutive months, SMEs can deduct as expenses 130 percent of pay raises granted to local nonmanagerial employees.

As SMEs comprise nearly 98 percent of Taiwan’s private sector, the MOEA expects 400,000 of these firms, mostly in the manufacturing and services sectors, to take advantage of the incentives.

Citing a study by Taipei City-based Chung-Hua Institution for Economic Research, the ministry said while this will reduce business income tax revenues, the loss should be more than offset by increases in personal income and business tax revenues from heightened consumption.

Preliminary CHIER estimates show that if one-third of local SMEs implement a 3 percent pay raise, the net tax benefits will be NT$317 million (US$10.43 million).

The MOEA said as the bill has bipartisan support, it is expected to clear the legislative floor before the current session ends Dec. 31. If everything goes as planned, the law will take effect next year.

Source: Taiwan Today (http://taiwantoday.tw/ct.asp?xItem=222599&CtNode=413)