Abstract
During recent years, logistics firms have adopted the global management model for serving the manufacturing industry. Because of its excellent capability on contract manufacturing, Taiwan becomes the top choice for global OEM firms to outsource their production, and occupies a pivotal position in global supply chains. To maintain this position in face of “the world is flat”, Taiwan has to keep its advantage on R&D, contract manufacturing and logistics capabilities as well as to improve its tax environment for attracting multinational companies to set up their distribution centers in Taiwan. The aim of this study is therefore to explore whether if Taiwan’s business income tax system creates barriers to logistics operation. This study uses a real case to trace how a semiconductor company H was to be taxed from importing materials to bonded factories, passing through the production processes of packaging and testing, to sending to distribution centers for exportation. The taxation was based on the business income tax law which taxed logistics operations according to the facts that they had “fixed business sites”, “showed business behaviors” and “generated added value”. However, this raised a doubt on double taxation in the way that a good was taxed twice, which subjected distribution centers to the tax risk and decreased multinationals’ motivation in setting up distribution centers in Taiwan. To prevent the tax barrier from driving multinationals’ distribution centers into other countries, this study compares Taiwan’s tax system with Singapore, Hong Kong, China, South Korea and Netherlands from the dimensions of “tax agreement”, “institution establishment” and “tax incentive”, and suggests directions for improving Taiwan’s tax system. Taiwan’s government should adopt a new way of thinking in tax reforms to solve the double taxation problem and make more efforts in signing tax agreements with other countries to eliminate multinationals’ doubt on taxation. By so doing, Taiwan will eventually be the top choice for multinationals to set up their distribution centers.