Taiwan cabinet approves 3% bank business tax cut

Asian Economic News, June 7, 1999

TAIPEI, June 3 Kyodo

Taiwan's cabinet Thursday approved a 3% cut in the business tax imposed on banks, insurers, security firms and other financial institutions in a bid to help the troubled sector reduce its debt burden.

The tax cut from the current 5% to 2% will be implemented July 1 pending parliamentary approval.

The tax cut was already decided in principle in February as part of six government measures aimed at revitalizing the island's ailing banking sector. As of end of March, Taiwan's banks were saddled with an estimated 630 billion N.T. dollars (21 billion U.S. dollars) in outstanding loans, equaling an outstanding loan ratio of 5.1%, according to the island's central bank Central Bank of China.

The banks are required to use profits resulting from the lower business tax to pay off bad loans with the aim of bringing the outstanding loan ratio below 2.5% within the coming four years.

Financial institutions came under pressure last year when local stock prices plunged and a number of major companies with high exposure in the stock market saw their checks bounce and were unable to repay bank loans.