TAIPEI - Taiwan has moved to levy a so-called "rich man's tax" on nearly 10,000 of the island's wealthiest people in a bid to narrow the income gap, officials said Friday.
Under the proposal, those with annual net income of over Tw$10 million (S$417,000), or the richest 1.5 per cent of individuals or families, will pay a 45 per cent income tax rate, up from the current 40 per cent, said the finance ministry.
"We will raise taxes for the top (earners) and reduce taxes for low and modest income earners ... which will definitely improve the income distribution," finance minister Chang Sheng-ford told reporters.
Taiwan's tycoons, including Foxconn Group founder Terry Gou and Morris Chang, chairman of leading contract microchip maker Taiwan Semiconductor Manufacturing Co., backed the proposal as "they have donated more money than the additional taxes" they would be paying, Chang said.
The proposal, which passed an initial screening in parliament Thursday, was part of the government's planned taxation reforms that will also include business tax hikes on banks and insurers as well as tax incentives for salarymen and the disabled.
It is expected generate an extra Tw$63 billion more a year in revenue for the government, including Tw$9.9 billion from the richest people as well as nearly Tw$19 billion from the banking and insurance sectors, according to the ministry.
Taiwan's income gap reached a record level in 2011, as the wealthiest families earned 96 times more than the poorest, according to the latest official data.
The bottom five per cent of families reported an average annual income of Tw$48,000, compared with Tw$4.63 million earned by the top five per cent in 2011, based on their income tax filings.
Observers have blamed the rapidly widening gap between the haves and have-nots as one of the reasons behind a recent string of anti-government protests.