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Thursday, June 16, 2011

Welcome to Fantasyland: the Commonwealth of Taiwan - Finances

Still dreaming…

A 1911 map of Japan, including Taiwan 

Being a commonwealth, and therefore without elected representatives sitting in the Diet 国会, Taiwan 台湾 does not receive any grants, subsidies or transfers of funds from the central government in Tōkyō 東京. Rather, the island’s government generates revenue from its own tax collections. Residents and businesses in Taiwan pay income tax to the commonwealth government, which in turn distributes money back to the various cities, towns and villages. The Taiwanese finance ministry also receives income in the form of a local value-added tax on all consumer goods, as well as taxes on such things as cigarettes, alcohol and gasoline. Under the terms of the free association agreement with Japan, the government has the authority to issue bonds, when necessary, in order to help meet its financial obligations.

Despite being fiscally independent from Tōkyō, the Japanese yen 円 remains the unit of currency in Taiwan, and all bills and coins in circulation are printed by the Japanese Ministry of Finance 財務省. Also, a system of mutual recognition is in place when it comes to tax payments. People who maintain family registries 戸籍 in Japan, but are living and working in Taiwan, make their income and residential tax payments to the authorities in Taiwan. These contributions are recognized by the central and local governments in Japan, and taxpayers are thus considered to have met their financial obligations in Japan proper. The same holds true for registered Taiwanese residents who are living and working in Japan – the Taiwanese government accepts and credits all tax payments made outside of Taiwan. The system is designed to protect taxpayers from double taxation and the roughly equal income and residential tax rates in both Japan and Taiwan serve to minimize incidents of tax evasion.

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