Study On Taiwan's Alternative Minimum Tax

The objective of this thesis is to introduce and review the Alternative Minimum Tax ("AMT"). The implementation of the AMT provisions in Taiwan is in response to deficiencies in the current Taiwan tax law. There are numerous tax incentives on specific income items for particular industries, and excessive income exemption and investment tax credits lead to taxation inequality and severe diminution of tax revenue. The abolishment of tax incentives may not be an effective solution for the diminution of tax revenue; thus, the AMT regulations were introduced after referring to the experiences of the AMT development in the United States, Canada and Korea. The objective of the implementation of the AMT is that both corporate and individual taxpayers would have to bear a fixed percentage of income tax to increase tax revenue, to improve tax equality and to lay down the foundation for income tax reform. Furthermore, this thesis analyzes the impacts on industries, corporations and individuals, and addresses the responses and improvements in connection to those impacts.For example, the exemption amount for AMT in the United States was not designed to be adjustable to adapt to inflation or the number of dependents. Due to the growth of economics and inflation, there are more taxpayers subject to AMT, which has modified the character of the AMT from a Class Tax to a Mass Tax. The cost to abolish the AMT in the future will grow significantly over time as increasing numbers of taxpayers become subject to it. When Taiwan implemented the AMT regulations, the inflation was taken into consideration to adjust the exemption amount. However, based on the observation of 2006 filing data, the AMT still tends to resemble a Mass Tax, which is worth paying attention to. AMT is a new taxation provision in Taiwan which is broadening the tax base as a stepping stone to tax equality. However, it is not the best option during this transitional stage. Whether from a macroscopic point of view or from the global tax reform trend, the ultimate solution should be amending the Income Tax Law in the direction of broadening the tax base, lowering the tax rate and simplifying collection techniques.