A Comparison Of Tax Burden In Banking Industry Across The Taiwan Straits

Accompanied by the ECFA taken into effect in 2010, the cooperation step of banking industry across the Taiwan Straits is accelerated. As a key factor for banking business, tax burden will make important influence in banking exchanges for both sides. In this context, it is very necessary to study tax burden between the cross-straits in banking industry.Through the comparison and analysis of the taxation system, it can be found that the turnover tax in Taiwan region is more beneficial for banks to lighten the burden. With the enforcement of new income tax law, the income tax system has been further improved in mainland. In this paper, 14 commercial banks in mainland and 17 banks in Taiwan from 2006 to 2009 are selected as samples, and effect tax rate including turnover tax burden, income tax burden and comprehensive tax burden are calculated. Based on the chart analysis, the turnover tax burden in mainland is obviously heavier than that in Taiwan, while the income tax burden across the Taiwan Straits is reaching unanimity. Influenced by the decrease of nominal income tax rate, the comprehensive tax burden in mainland is lower than that in Taiwan right now.Then, this paper has an analysis of influencing factors on the banking tax burden between the cross-straits. Through the comparison of the tax systems and the conditions of tax shifting, it shows that both are important factors resulting in the heavier turnover tax burden in banking industry of mainland. Furthermore, this paper adopts the panel-data model to explore the influence of main three business index——net income of deposits and loans, net income of commissions and gains from investments——on turnover tax burden both mainland and Taiwan. The empirical result shows that business structures have a strong effect on tax burden. The increase of the proportion of income from deposits and loans will lead to the raise of banking turnover tax burden. On the study of influencing factors on income tax burden, it shows that tax system is the most essential reason leading to the converging of both banking burden. It shows that tax shifting have also made some influence. In addition, the paper make good use of clustering analysis, parameter and non-parameter testing to analysis the correlation between banking size and income tax burden. But the result is not significant, which means there isn't an obvious relationship between banking size and tax burden. On the analysis of the factors affecting comprehensive tax burden in banking industry, it shows that the impact from turnover tax burden is more obvious than that from income tax burden.Finally, the paper gives some suggestion about lightening the tax burden and improving the tax system in banking industry of mainland: firstly, the tax rates of main business should be reduced in order to relieve turnover tax burden; secondly, a complete system for withdrawing bad debt reserve fund should be established according to the loan hazard classification; thirdly, fiscal and taxation system reform should be deepened and the pace of interest rate marketing reform should be quickened; fourthly, the coordination of taxation in banking industry across the Taiwan Straits should be strengthened.