The Malaysian Insider

TAIPEI, Oct 15 — If Taiwan’s famous betel nut beauties are looking grumpy these days, it might be because the authorities have proposed a tax on betel nuts.

Health Minister Yaung Chih-liang said last week that the government was considering slapping a 13 Taiwan cent (RM1.35) tax for each betel nut, which health experts say can cause oral cancer when chewed.

Yaung said the proposed move was aimed at improving public health as well as the island’s tax coffers.

Betel nut is grown on more than 50,000ha of land around the island and is Taiwan’s biggest cash crop.

Betel nut users often chew the spicy date-like fruit of the betel palm for a quick buzz. It contains an addictive stimulant similar to nicotine.

China Post, in an editorial, said that if a heavy tax could be collected from cigarette smokers, there was no reason a lighter tax could not be imposed on betel nut chewers.

The government’s plan comes at a time when alarm has been sounded over a plunge in the island’s tax revenue and rising public debt.

Taiwan’s tax returns for the first eight months of the year amounted to only NT$995.6 billion, according to figures released by the Finance Ministry last Friday. This was a record 17.8 per cent drop from the same period last year.

Public debt reached NT$3.89 trillion, or about a third of Taiwan’s gross domestic product, by end-August.

The drop in tax revenue is due to the economic downturn, as well as tax cuts and concessions which have allowed the wealthy to pay less tax, said National Chengchi University finance lecturer Norman Yin.

Scholars across the political divide agreed that Taiwan’s financial health has worsened and that the tax system was unfair, the Commercial Times noted in its editorial.

For instance, a cut in inheritance tax from as high as 50 per cent to 10 per cent earlier this year has led to an estimated reduction of about NT$20 billion in tax collected.

This may not seem like a big sum but it is a key source of income for local governments, Professor Su Jain-rong, a tax expert from the National Taipei University, told The Straits Times.

While the cut is designed to help attract funds back to Taiwan, many scholars said there is little sign that the reduction has achieved its aim.

Net inflows of funds into Taiwan for the first half of the year were more likely due to the attraction of Taiwan’s stock and property markets, said Yin.

Still, a Central Bank official told the Economic Daily News it was too early to tell what impact the cut in inheritance tax, implemented earlier this year, would have.

Su, commenting on the possible impact of the cut, said: “If the money is used for speculation in the property market, those who are poorer will not be able to afford homes and this then worsens the distribution of wealth.”

To plug shortfalls in tax revenue, the government is not just targeting betel nuts, but is also mulling over moves like an increase in consumption tax. This stands at 5 per cent now, relatively low compared with Singapore’s 7 per cent, South Korea’s 10 per cent and Britain’s 15 per cent.

But some say these moves would be tantamount to robbing the poor to give to the rich.

Salaried workers bear the brunt of taxes in Taiwan, with income taxes accounting for the bulk of total tax revenue.

Yin said the government needs to reform the tax structure to make it more just and sound.

The government also needs to be more efficient in its use of public funds and avoid wasteful projects that end up as white elephants, he said.

“If not, the increased tax funds will be burnt off in a jiffy like fireworks.”

Taiwan’s top official in charge of agriculture, Chen Wu-hsiung, said on Monday that the proposed betel nut tax, if levied, should be used to facilitate land conservation and ecological protection.

But taxing the cash crop, valued at NT$8.6 billion last year, might be difficult to carry out as farmers and vendors do not need a licence to sell betel nuts.

The ruling Kuomintang legislative caucus also noted that imposing a tax on betel nut would hurt the livelihoods of some grassroots residents. — The Straits Times