The upgrade and transformation of Small and Medium-Sized Enterprises (SMEs) and the advance of their added values are necessary means to react to the rigorous international competing environment. The theory of comparative advantage, the theory of Market failure, infant industry argument, strategic trade theory, balance and unbalance growth theory, and endogenous growth theory all support that governments should intervene the development of industries to keep industries competitive. Therefore, governments should execute policies such as government expenditure, tax discounts, and finance and low-interest loans to help the development of SMEs. In particular, empirical researches in domestic literatures have proved that tax discounts do benefit business development. In addition, to keep international competitiveness for local companies, building a robust and excellent tax environment and offering relevant incentive steps have become quite important when local companies face international competitors with tax discounts. This project reviews the shortages of the tax law environments in our nation and than examines with data the unfair situations that SMEs have faced when compared with situations that large enterprises have done. Based on these examinations, this project will portray the predicaments that SMEs face in terms of tax discounts. Moreover, according to the macroeconomic environment that SMEs will face in the future, including competitions from newly developing countries, formations of regional economy and trade, changes of overall industrial structures, and restrictions on global environment protections, this project will sketch the contours of the direction with which the government should help SMEs. This project drafts four principles: the size of external benefits, the enhancement of international competitiveness, the integrity of fiscal and taxing structures, and the common consensuses of the “Conference on Sustainable Development of Economy” and than inducts three items of tax discounts that SMEs need most. These three items are “the tax discount for R&D, Human Intelligence, and Branding and Marketing,” which fits all of the principles above, “the tax discount for automation equipment, encouragements of developing green industries and barren areas”, which fits the principles of the enhancement of international competitiveness, the integrity of fiscal and taxing structures, and the common consensuses of the “Conference on Sustainable Development of Economy”, and “the investment credit of health accounting system”, which fit the principle of the integrity of fiscal and taxing structures.
Finally, according to the items that SMEs need most, this project proposes steps that should be adopted when SMEs face the sunset of Statute for Upgrading Industries and the promotion of Plan for Fiscal Reform: First of all, the government should shoot for decreasing Profit-seeking Enterprise Income Tax, imposed on the undivided profit of SMEs, from 10% to 5% or to 0% through the continuation of tax discounts of “The Bill on Promoting Innovative and Value-added Industries” or through the establishment of “Plan for Fiscal Reform” and should revise outdated articles in the “SME Development Statute” to meet SMEs’ needs.
Secondly, if the tax discounts continuation and all tax discounts of Statute Draft for “The Bill on Promoting Innovative and Value-added Industries” are passed, we will shoot for considering the applicability of tax discounts for SMEs. Besides avoiding threshold restrictions on investment scales and minimum investments, the government should consider setting up a certain ratio or a certain amount of money bulwarking the tax discounts of SMEs. If all tax discounts are passed but the discount rates of large enterprises are decreased, the government should shoot for keeping the discount rates of SMEs unchanged and releasing the applicable threshold Thirdly, if Plan for Fiscal Reform is established but “The Bill on Promoting Innovative and Value-added Industries” are canceled, the government should shoot for providing tax discounts in “The Bill on Promoting Innovative and Value-added Industries” to SMEs exclusively. If the tax discounts for SMEs cannot be incorporated into “The Bill on Promoting Innovative and Value-added Industries”, the government should shoot for incorporating them into SME Development Statute.
If the tax discounts for SMEs cannot be incorporated into both of the Statutes above, the government should seriously consider subsidizing and rewarding SMEs for their relevant external expenditures to balance the competition conditions among large enterprises, cross-nation businesses, and domestic SMEs.