Labor laws to increase living costs

‘PRICE OF MODERNIZATION’The premier said the Cabinet intends to reduce personal income tax and raise corporate taxes, prompting criticism that he was trying to sow panic

By Chen Wei-han  /  Staff reporter

An increase in consumer prices is inevitable because of the newly promulgated labor law amendments that increase overtime pay for workers, Premier Lin Chuan (林全) said, adding that the Cabinet plans to increase corporate income tax rates and lower personal income tax rates as part of a tax reform scheme.

In an interview with the Chinese-language China Times published yesterday, Lin said that transportation fares and prices at restaurants are likely to increase following the amendments to the Labor Standards Act (勞動基準法). The revisions stipulate a five-day workweek with one fixed day off and one flexible day off, with employees entitled to overtime pay if requested to work on their flexible day off.

Transport operators have to increase fares to pay for more drivers under the new system, Lin said, while urging operators to slow the pace and degree of price hikes to mitigate the effects.

While in some sectors, employee salaries are not likely to increase, leave time will, which is a major objective of the legislation, Lin said.

The public must accept that if restaurants close on Saturdays to reduce personnel costs this is the “price of modernization,” Lin said.

However, he called on businesses not to use the legislation as an excuse for an across-the-board price hike.

A shift from labor-intensive to automated manufacturing is a natural development in different sectors, which is little associated with the legislation, he said.

In another interview with the Chinese-language Economic Daily News, Lin said the government would adjust corporate and personal income tax rates, but ensure it does not affect tax revenues.

The highest personal income tax rate is 45 percent and the maximum corporate income tax rate is 17 percent. The tax gap has encouraged local investors to use offshore accounts and shell companies to invest in the local market, Lin said.

To reduce tax evasion while maintaining a healthy economy, the Cabinet is considering narrowing the gap between the taxes while ensuring premise that the total tax revenue would remain unchanged.

Lin said there would not be a large-scale adjustment and the Executive Yuan has yet to propose an adjustment plan.

Lin’s remarks prompted criticism from some politicians and business leaders.

Former Presidential Office deputy secretary-general Lo Chih-chiang (羅智強) said the price hikes would lead to inflation.

Citing President Tsai Ing-wen’s (蔡英文) criticism that former president Ma Ying-jeou’s (馬英九) adjustments to petroleum and electricity prices in 2008 might trigger “inflation” as consumers would panic over rising prices, Lo said Lin’s comments could trigger the same response.

“Are you, as the premier, trying to create panic over rising prices and trigger inflation by announcing publicly that price hikes are inevitable?” Lo, who served in Ma’s administration, wrote on Facebook.

Far Eastern Group (遠東集團) chairman Douglas Hsu (徐旭東) said the proposed tax rate adjustment was “interesting” amid a global trend to reduce taxes.

Chinese National Association of Industry and Commerce chairman Lin Por-fong (林伯豐) said the maximum corporate tax rate should be maintained at 17 percent because the labor legislation would increase businesses’ personnel costs by between 5 and 8 percent.