The Alliance for Fair Tax Reform (AFTR) yesterday slammed a recent TV commercial claiming that lower tax rates correlate with a strong economy, and challenged the anonymous advertiser to a public debate.
In recent weeks a repeatedly aired TV commercial has sent the message that the lower the tax rate, the better the economy and the lower the unemployment rate.
The commercial cites the US economy under former president Ronald Reagan’s administration as an example to support their claim on the relationship between the economy and tax rates.
It also says that Hong Kong and Singapore are more economically developed and people there have more purchasing power than Taiwanese because of lower tax rates.
“Economic development in a country is affected by multiple factors, and there is no absolute direct connection between economic development and the tax rate,” Huang Shih-hsin (黃世鑫), a public finance professor at National Taipei University, told a press conference in Taipei yesterday.
“How good is the economy in tax-free paradises such as the British Virgin Islands or the Cayman Islands?” Huang asked. “People register their companies at these places just to avoid taxes, but they usually don’t make any actual investment.”
On the other hand, in high tax countries such as Sweden, “the economy performs quite well, the social welfare system is great and the quality of life there is high,” he said.
Chien Hsi-chieh, spokesman for the alliance, pointed out that the commercial is not telling the full story.
“[Former US presidents Ronald] Reagan and [George] Bush wanted to boost the economy by cutting taxes — it did work at first, but caused a bigger gap between the rich and the poor,” Chien said.
“In the end, the US government became severely indebted, and the unemployment rate went up to 12 percent under the [George] Bush administration,” he said.
The issue only improved a little after Bill Clinton increased taxes, he said.
Chien went on to say that Hong Kong and Singapore were able to keep low tax rates because they were city-states.
“They don’t spend money on agriculture or national defense,” he said. “And in fact, while the tax rate in Taiwan is 40 percent, the real tax rate is only 13 percent after exemptions for businesses, which is already lower than the 17 percent tax rates in Hong Kong and Singapore.”
Chien said he believed further tax cuts may lower the tax rate to below 10 percent.
“While [President] Ma Ying-jeou [馬英九] has so many projects planned, how will the government get the money?” AFTR convener Wang Jung-chang (王榮璋) said.
Wang suspected that business groups lobbying for reductions in inheritance, gift and business taxes were behind the commercial.
“So this is really a tax cut campaign for the rich, but they’re brainwashing the public to join their campaign,” Wang said.
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