Local semiconductor companies responded positively Thursday to a proposed increase in tax deductions for corporate spending on research, development, and equipment investment, which Premier Su Tseng-chang (蘇貞昌) touted as being the largest ever in Taiwan.
The proposed amendment to the Statute for Industrial Innovation, which will be reviewed by the Legislature before it can be passed into law, seeks to introduce a 25-percent income tax deduction, an increase from the current 15 percent, for eligible companies whose research and development (R&D) expenditures reach a predetermined level.
There will also be an additional 5-percent deduction when those companies purchase advanced equipment, with the maximum combined tax deduction set at 50 percent of the company’s total income tax.
The proposal is conducive to retaining advanced technology sectors in Taiwan, consolidating its competitive edge in the semiconductor and other sectors, which in turn would improve the nation’s economic and overall security, Su said.
With most of the world’s advanced semiconductors being made in Taiwan, the more robust Taiwan’s semiconductor sector is, the more robust the global economy will be, the premier said.
Minister of Economic Affairs Wang Mei-hua (王美花) said that a global chip shortage amid the COVID-19 pandemic had negatively impacted the automotive industry and caused the international community to place an emphasis on ensuring steady chip supplies.
As the U.S., EU, Japan, and South Korea are doling out large subsidies and providing tax benefits for the semiconductor sector, Taiwan, as a global leader in advanced semiconductor manufacturing, should take steps to retain its competitive edge, hence the proposed tax break, she said.
National Development Council Minister Kung Ming-hsin (龔明鑫), who reportedly mediated between relevant agencies while the proposal was being drafted, echoed Wang’s views, citing the U.S.’ CHIPS Act as an example of governments supporting the semiconductor industry.
Taiwan occupies a niche position with its advanced semiconductor manufacturing and should take action to retain its competitive edge, he said.
The news of the proposed amendment received a prompt response from several semiconductor companies later on Thursday.
Taiwan Semiconductor Manufacturing Co. (TSMC) said in a statement it welcomed the proposed increase in tax deductions aimed at incentivizing companies to conduct more R&D, while vowing to continue investing in Taiwan.
MediaTek said in a statement that it hoped follow-up regulations would be drafted in a way that addressed the different requirements in the design and manufacturing of semiconductors.
Amid international competition between chipmakers, incentivizing Taiwan-based companies to increase R&D could boost the competitive edge of Taiwan’s semiconductor industry, it said.
ASE Group CEO Tien Wu (吳田玉) lauded in a statement the timely proposal, which would sustain the R&D momentum of Taiwan’s semiconductor industry in an increasingly competitive international arena as governments issue large subsidies to semiconductor manufacturers.
However, the actual efficacy of the proposed amendment would likely become clear after follow-up regulations and accompanying measures are set, he said.
Also in a statement, SEMI Global CMO and President of Taiwan Terry Tsao (曹世綸) cited recent disclosures about Berkshire Hathaway’s US$4.1-billion purchase of shares in TSMC, and ASML’s announcement that it would increase its investments in Taiwan, as examples of international companies expressing confidence in Taiwan’s semiconductor sector.
The sector is forecast to contribute 21 percent of Taiwan’s GDP in 2022 on the back of significantly increased exports, and its total value from January to June marked a 37-percent rise compared to the same period last year, Tsao said.
Against the backdrop of increasingly fierce global competition among semiconductor companies, the proposed amendment comes as a timely assist for the local semiconductor sector, which would boost other sectors in Taiwan if it could maintain its advantages, Tsao said.

Source: Focus Taiwan News Channel