My mother recently brought up a question which took my attention and I like to forward to this forum here. I am sorry if “that” has been discussed here before, but anyway …
How come Taiwan seems to be a very rich country, which (as I heard/read somewhere before) has actually stored the world´s highest gold-reserves.
The tax rate for the working force is incredible low. I have no idea about the cooperate-tax, only can imagine it is the same low.
So where are all the government funding actually is coming from ?
And yes, I know the current in power DPP wants to cut (or already has done it) pensions, which indeed are/were way to generous for many of the older local taiwanese population. #
Nevertheless, the key question remains, how come TW is such a rich country (keep in mind no oil/gas fields nor much treasures down the ground as well) ???
Don’t have a complete answer, but Taiwan produces a lot of computer hardware and semiconductors and things like that for the rest of the world, so that’s part of it.
I have asked this question for a long time as well.
How can incomes be so meh and net worth be so high?
I look at my wealthy relatives in Taiwan, and they got rich by selling farmland. But that’s a zero sum game; it shouldn’t increase Taiwan’s net wealth.
We’ve got hardly any foreign money coming in.
Perhaps in the heyday, when Taiwan was running humongous trade surpluses and accumulating inordinate amount of foreign reserves, it invested that money abroad and the returns came in?
TSMC controls 50%+ of WORLD-wide market of foundry chip making, something another company or country can not do overnight or even in years. A foundry (factory) costs BILLIONS US$ so very few companies has the Cash and more import the staff and skills. Most TSMC plants are in Taichung and Tainan (big part current Tainan wealth) and not in China. All designed and built in Taiwan with highly skilled and paid staff. Other Taiwan companies like UMC in Hsinchu and Tainan and have this huge Taiwan eco system.(people working this huge $$ industry are by far best and most clever in this world here in Taiwan something most posting here do not give credit to) AND TSMC is growing with 5G (even China needed their Taiwan made chips)
Taiwan was the worlds factory after Japan and before China. A lot of this wealth comes from the period of the 80s-90s and is mostly in the Boomer and and older Generations. The younger ones are just working their 30-80k NTD jobs waiting for the wealth transfer from their parents/grand parents and if theyre buying houses its with huge assistance from family.
TSMC and other smaller Chip Taiwan companies are intergrated foundries, meaning they MAKE and design all, so most of their revenue (and your 10 billion is PROFIT not rev’s) all stay in TAIWAN. Apple, does not build or own their factories, a lot of their revenue does not stay in the States but goes to China and small portion their Taiwan main contact builder Hon Hai (which is Taiwanese, but mostly operates in China).
Depends on the income. There is a reason the gold card holders only pay half tax above 3 mill NT income, the income tax rate in Taiwan for higher incomes is not competitive.
The profit tax is not high but the taxation on dividends is extremely silly. But with some help, one can work around that.
Apart from business taxes: customs duties, commodity tax (the notoriously high tax on imported cars), securities transaction taxes, etc. You can check the numbers here:
Edit: There are also several profitable state-owned businesses like CPC. Those profits go back into the budget.
Lists Taiwan corporate tax rate at 20% and personal income tax rate at 40%. In practice, I believe most corporates (especially in tech) pay a somewhat lower rate in the ~10% range due to numerous R&D and other sorts of incentives. As for personal income tax, this obviously depends on the tax bracket and that 40% refers to the highest bracket (the incremental tax rate on income above NT4.5 million. In this income range, Taiwan taxes are substantially higher than US federal tax.
The second link shows the break down of Taiwan government revenue sources. So mostly (~80%) from taxation… and within this taxation ~45% from income tax and ~17% from business tax
TSMC and other chip companies only explain part of it.
A lot of wealth is generated in very traditional industries (plastics, food, precision manufacturing, real estate, commodities, etc.) that don’t get the press and attention that tech does.
The KMT hiding and moving China’s treasure and gold to Taiwan is honestly a great movie plot that is missed. You can do something like National Treasure where treasure is hidden in China that never got out in time. And follow some notes from the Generalissimo that was his plan to recover it once he takes back the mainland to find it.
The KMT took actual gold and silver from the mainland. It was used to build up the country. I think the New Taiwan dollar was originally backed by it. Old Taiwan dollar suffered from hyperinflation due to the war. The gold from the KMT literally build up the country’s wealth since old Taiwan dollar became useless.
If you read Thomas Sowell, then you know it is a repeated historical fact that when you lower tax rates, you actually get greater tax revenue. Simply, too much accumulated tax (including income tax) de-incentivizes people to create, develop and work. Government can only create tax rates. It’s the people’s reaction to such rates which matter. Moreover, ethnically Chinese people generally have a very strong affirmation of hard work and study. Given the chance to freely grow and develop, Taiwan has allowed its admirable cultural tendencies to flourish. It is interesting that until 1994 the total wealth of the diaspora Chinese equal that of all of China. Simply, discrimination in countries like Malaysia, the Philippines or the USA was irrelevant to ethnic Chinese achieving wealth. In all these countries ethnic Chinese people on average achieved greater income than those who previously discriminated against them. Culture is the key factor to success.