An Analysis Of Comparison Between The Separation And The Integration Of Taiwan Corporate And Individual Income Tax System

Before December 31, 1997, Taiwan corporate income tax levy was separated from individual income tax. Therefore dividends declared by the corporate income out of retained earnings and distributed to the holders were subject to withholding corporate tax, as well individual income tax. In other words, the same tax income source was levied twice.Since January 1, 1998, Taiwan has carried out the integrated income tax system, under which the corporate income tax can be used to offset the shareholder's income tax. The main purposes of the new tax system are to eliminate double taxation on investors' earnings, to encourage more investments and to promote long-term economic development. However (to prevent from losing substantial tax revenues), Taiwan tax authorities imposed a 10% income tax unappropriated retained earnings; But there are no criteria set to determine which items shall be added or subtracted in the calculation formula of 10% income Tax to on unappropriated retained earnings forms. As a result, the calculation formula is deemed to be a very controversial and complicated issue.My thesis is based on my personal professional practice, the recognition of the changes between two tax system in recent years, research of related papers written by scholars as well experts, then to analyze and reach a conclusion according to the above methodology.In conclusion of my study, the integrated income tax system shall be simplified, and governmental tax organizations shall gradually cancel the other associated preferential tax treatment, such as granting the right to credit up to 20% of investments in emerging, important and strategic industries against tax payable within five years, in order to prevent from decreasing national budgets from tax collections as well to build a justifiable tax collection environment.