The government should take initiatives to strengthen bilateral cooperation with the United States in the field of digital technology and advanced manufacturing after a tax cut bill was passed by the U.S. Congress, scholars urged Thursday.

Under the legislation, the federal corporate tax rate will fall from 35 percent to 21 percent and the maximum individual income tax rate from 39.6 percent to 37 percent, according to foreign wire services.

Liu Da-nien, director of the Center for Regional Economic Integration under the Chung-Hua Institution for Economic Research,said the tax overhaul is expected to lure overseas American capital back to the U.S. and further help improve its domestic manufacturing environment.

Some Taiwanese businesses may shift their investment to the U.S, Liu said, citing Hon Hai's decision to invest in Wisconsin because of the incentives offered by the state.

As Taiwan will also launch a series of tax reforms, Liu suggested the country should learn something from the U.S., deepen Taiwan-U.S.tax and trade agreements to sharpen Taiwan's competitiveness and take the initiatives in cooperating with the U.S. in digital and advanced manufacturing industries.

Norman Yin, a professor in the Department of Money and Banking at National Chengchi University, said that after the tax reform the U.S. will attract greater foreign capital. He also pointed to Hon Hai as example, opining that capital inflows to the U.S. will impact flat-dish emerging markets and could squeeze their capital movement and result in interest rate rise.

C.L. Ting, an executive at KPMG, an accounting firm,said that whether the U.S. tax reform attracts more Taiwanese companies to invest depends on the firm in question.

Taiwanese businesses are flexible so they can meet the customized needs of their customers in a timely fashion, which is to say if there was major demand from the U.S. market, more Taiwan companies would consider setting up plants there, she said.

However, companies must also weigh issues related to salary levels,production cost and supply chains in each market, she explained.

For his part, Minister of Economic Affairs Shen Jong-chin said the U.S. tax revamp would have only a limited impact on Taiwan's small and medium-sized enterprises, though bigger companies might need to adjust their global strategies.

Addressing concerns that Taiwan businesses could relocate to the U.S., Shen said only big companies with overseas investments such as Hon Hai would be impacted by the U.S. tax cuts. Those which retain production in Taiwan will not be affected, he added.

However, Financial Supervisory Commission Chairman Wellington Koo said more time is needed to gauge the impact of the U.S. tax reform on Taiwan, as no signs of volatile capital movement have been seen in the local stock market.

(By Y.Y. Liao, P.S. Chiu and Flor Wang)Enditem/AW

