Friday, January 01, 2010

Til Taxes Do Us Part

Last week's SEF-ARATS negotiations surprised everyone when the two parties couldn't come to an agreement on the tax issue. The CNA reports....
Taiwan has no knowledge of why China altered its decision. Both sides were fully aware that further negotiation was necessary on the question of whether taxes should be collected based on their country of origin or the country in which they reside, " Lee told ruling Kuomintang (KMT) Legislator Lo Shu-lei at a legislative hearing on the cross-Taiwan Strait talks.

Lo said she suspected the agreement was shelved at the last minute because of a backlash from China-based Taiwanese businesses, which were worried they might be penalized by Chinese authorities for tax evasion based on information provided by Taiwan under the terms of the planned agreement.

Lee responded that paying tax is both an obligation and responsibility of a country's citizens, and he said Taiwan and China would only exchange information in serious tax evasion cases "in line with Taiwan's laws." KMT Legislator Lai Shyh-bao attributed the breakdown in talks to opposition from Hong Kong, which feared it might be unable to collect taxes once a deal was signed from the many Taiwan businessmen who have invested in China through the former British colony.
The ECFA agreement, after all, is supposed to help business. But Taiwan's small businessmen have grown used to working in a tax-free environment. Further, there is a deep distrust of Chinese firms among Taiwanese businessmen in China:
Tony Cheng (鄭榮文), honorary chairman of the Taiwan Merchant Association in Shenzhen, said yesterday that few of his association’s up to 4,000 SMEs were inclined to partner with Chinese businessmen.

“Like tying the knot in a marriage, it’s always hard to find the right [business] partner here in China who shares your business strategies, philosophy and integrity,” Cheng said by telephone.

He nevertheless said that he didn’t rule out the possibility that Taiwanese businesses, which have an edge in research and development, quality control and management skills, can locate suitable Chinese partners to take advantage of their locally well-known brands and their knowledge about the Chinese market to create synergies for both sides.
Despite the loud proclamations of blood ties and whatnot from the pro-China politicians and media, the reality is that working in China has not created a groundswell of support for annexation among businessmen there. Quite the opposite. It looks like many in the business world are not seeing much beneficial in ECFA; formalizing the relationship between Taiwan and China may threaten their operations. What are the implications for Ma Ying-jeou in 2012?

In other cross-strait news, Dow Jones reported that China will permit transshipment
China's Ministry of Transport said it will relax its rules and allow container shipping companies that ply the Taiwan Strait to carry transshipment cargo, or goods originating from other economies.
...but it's still a "domestic" route:
Taiwan and China established direct cross-strait shipping links in December 2008, but only Taiwanese and Chinese ships registered in Taiwan, China, or Hong Kong are allowed to ply the cross-strait route, and cargo was limited to goods originating from Taiwan or China.
Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!


Anonymous said...

The idea of integrating two different cultural, economic and political systems that have never operated in concert (no, the Qing administration of coastal Taiwan was a glaring particularity in the imperial system) is pure folly. The advantages Taiwan can leverage as an independent and autonomous state far outweigh the advantages of yielding to Chinese nationalists sentimentality for their imagined motherland. Chinese Taiwan would simply become a minor economic region that must bend to the whim of Chinese centrality and thus could easily be made to be insignificant in favor of a more advantageous region.

Michael Turton said...

Yes, yes, yes.

Anonymous said...

Really like your "like a painting you can ride through" photo.

Your dollar amounts are NT? If so, that is a really good deal!

"Protecting both the beach, and concrete firms' bottom lines, from erosion."

Do they help with erosion? I thought they were obstacles to prevent an amphibious assault by China?

Anonymous said...

While I would agree, finding Chinese business partners can be difficult, so can doing business with Taiwanese.

Its not as if Taiwanese firms in China are shining white knights of corporate governance and integrity.

I have met many a Chinese factory that was screwed by Taiwanese companies.

Plus China is changing fast - I would say southern China has embraced many Taiwanese business practices, quality control skills, and R&D. (In fact, they sometimes do better than Taiwanese firms in these areas.)

I think Taiwanese and their supporters sometimes think a little too much of themselves.