The Cabinet recently dropped a proposal to allow individuals to deduct up to NT$12,000 (US$368) spent on cultural expenditures from their income taxes, but approved a proposal that would allow businesses to write off money spend buying tickets to cultural events for students as an operating loss or operating expense.
Under the proposal, there would be no limit to the amount a company could spend on tickets for elementary and junior high school students, which would help reduce its business income tax.
The Cabinet move drew mix reactions and prompted debates on whether it would help boost the cultural sector.
Premier Liu Chao-shiuan (劉兆玄) said earlier the tax incentive proposal was meant to encourage an interest in the arts in young people.
“I was very much impressed during a visit to an European friend who spends most of his income on cultural activities and eats simple meals based on bread and milk. To cultivate a devotion to arts should start in childhood,” Liu said.
Council for Council Affairs (CCA) official Fang Jy-shiuh (方芷絮) said on average, individuals spend 13 percent of their annual expenditures on arts and cultural activities. The government would like to see that raised in four years to 15 percent and has planned a series of programs aimed at doubling the output value of cultural and creative industry from NT$580 billion last year to NT$1 trillion a year, she said.
The government’s decision to drop the individual tax deduction in favor of businesses was criticized by Hsu Po-yun (??, founder of the New Aspect Cultural and Education Foundation and an adviser to President Ma Ying-jeou (馬英九).
Hsu said Liu had “made the wrong decision” and the move illustrated a lack of cultural education among policymakers
It was inappropriate to make a comparison between tax incentives for businesses with tax deductions for individuals because they served different functions.
Council for Cultural Affairs Minister Huang Pi-twin (黃碧端) previously said the main opposition to the individual tax deduction came from the Ministry of Finance, which estimated such a deduction would cost the treasury NT$6.5 billion a year and feared it might have a domino effect on other sectors.
Democratic Progressive Party Legislator Wong Chin-chu (翁金珠), who proposed a bill to offer the credit to taxpayers, said it was shortsighted of the government to focus on possible lost revenues.
It didn’t make sense for the government to say that offering tax credits for cultural expenses would lead to tax losses when the government often granted tax credits to businesses to encourage new investments on the basis such incentives would eventually bring in more revenue.
Chinese Nationalist Party (KMT) Legislator Kuo Su-chun (郭素春) disagreed.
A tax credit for taxpayers would only benefit people with medium and high incomes because low-income households prefer to take the standard deductions instead of itemizing deductions on their tax returns.
There could also be insurmountable technical difficulties in implementing an individual tax credit, Kuo said.
“For example, it would be a laborious task for tax officials to verify each and every receipt submitted by taxpayers to claim for the [cultural] tax deduction,” she said. “Some people might also use other people’s receipts to claim the deduction.”
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