Taiwan's Ma Seeks Corporate Tax Breaks in Bid to Boost Wages

  • Ma rejects attempting to devalue currency to help exports
  • Calls for enactment of controversial China services-trade deal

Taiwan's president Ma Ying-jeou poses for a photograph following an interview at the presidential palace in Taipei.

Photographer: Billy H.C. Kwok/Bloomberg

President Ma Ying-jeou is seeking tax breaks for Taiwan’s companies to encourage them to boost wages, helping address income stagnation that’s undermined support for his policy of deepening economic ties with China.

"Wage growth is relatively slow, so we’re trying to pass legislation and other methods to get companies to raise wages," Ma said in an interview Thursday in the Presidential Office building in Taipei. "Taxation is one of the measures. Enterprises can get tax breaks if they increase wages. We are pushing for this."

Ma, 65, recognized that domestic concern has escalated over the year that manufacturers’ shifts of factories toward mainland China had undermined jobs and incomes at home.

"Taiwan does have a wage stagnation problem," said Claire Huang, an economist at Societe Generale SA in Hong Kong. "I think that if Taiwan can see an acceleration of trade liberalization there might be some positive impact on wages."

The president, now in his final months in office after being first elected in 2008, rejected the idea of pursuing a cheaper currency as a way to support Taiwanese export competitiveness.

"Of course, a lot of companies hope the government could change the exchange rate between the Taiwan dollar and the U.S. dollar in order to boost the prospects of exports," Ma said. "If every government in the world did that, then it wouldn’t work even if we did this."

The central bank, which oversees Taiwan’s currency policy and has had a policy of stepping into the market when there’s excessive volatility, declined to comment. The bank has engaged in routine intervention in the Taiwan dollar, according to an assessment by the U.S. Treasury.

Exchange Rates

The president said "the exchange rate should be determined by the market and based on supply and demand." He also highlighted a campaign dubbed Industry 4.0 that’s designed to encourage innovation and bolster Taiwan’s competitiveness.

Household incomes have grown on average just 0.63 percent annually over the period of 2008 through 2014, compared to the 0.3 percent pace of 2000 to 2007 under the previous administration to Ma’s. Back in the 1990s, Taiwanese households saw income gains clocking 7.54 percent.

Ma underscored the importance of following through on an agreement with China to open up trade in services that became a magnet for domestic opposition last year.

Cruel Realities

"For our small and medium enterprises, this is especially beneficial," Ma said, referring to the trade deal that still needs parliamentary approval. Referring to opponents including the student protesters who took control of the legislature’s building last year, he said "they don’t believe any of it."

Ma, speaking less than two weeks after meeting with Chinese President Xi Jinping -- the first such tete-a-tete between leaders of the two sides in the postwar era -- said there was little option but to engage with China.

"You may not like their rules, you may not support some of their undemocratic practices, but in terms of economics, this is a very real and cruel reality," Ma said in the interview in the office building built during the Japanese colonial period about a century ago. "We shouldn’t put all our eggs in one basket but we can’t not put any eggs in the biggest basket."

With six months left in office before he completes his second term, Ma laid out a legacy that features deepening ties with both China and other trading partners. He noted the end of a fisheries dispute with Japan, economic cooperation deals with Singapore and New Zealand, and a surge in visa-waiver travel for Taiwanese people to 153 countries, from 54 before he took power.

Some $2 out of every $5 of Taiwan’s exports go to China, and the slowdown in its giant neighbor has contributed to economic pain on the island in the run-up to presidential and legislative elections in January.

Gross domestic product shrank 1.01 percent in the three months through September from a year before, the first decline since the 2009 global recession. Along with a slide in exports, weakening domestic consumption growth hurt GDP last quarter.

"The key to its future depends on whether it can further integrate with the outside world," Societe Generale’s Huang said.

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