MOEA Convenes SME Policy Review Committee, Eases Salary Cap for Employees of Sole Proprietorships and Partnerships

To address the low-wage dilemma, the Ministry of Economic Affairs and the Ministry of Finance, following their proposal of the draft amendment to Article 36-2 of the "Small and Medium Enterprise Development Statute" to encourage SMEs to raise wages for "entry-level employees" through tax deductions for wage increases, have once again joined forces by convening the 19th meeting of the Executive Yuan's Small and Medium Enterprise Policy Review Committee to ease the ceiling on salary reporting for employees of sole proprietorships and partnerships.

The 19th meeting of the Executive Yuan's Small and Medium Enterprise Policy Review Committee was chaired by Deputy Minister Shen Rongjin of the Ministry of Economic Affairs and convened on the afternoon of December 24 of this year (2014), bringing together representatives from relevant ministries and agencies including the Central Bank, the Financial Supervisory Commission, the Ministry of Finance, the Ministry of Transportation and Communications, and the Ministry of Education, as well as representatives from industry, academia, and research circles. Five report cases and two discussion cases were presented at the meeting. Among the discussion cases, in addition to amending the provisions on the criteria for identifying small and medium enterprises to make the application of such criteria more explicit and flexible when various agencies provide guidance to SMEs, a proposal was specifically put forward, in line with the amendment progress of the wage-increase tax-reduction provisions under Article 36-2 of the Small and Medium Enterprise Development Statute, to ease the salary ceiling for general employees of sole proprietorships and partnerships for those sole proprietorships and partnerships that will pay half of their business income tax in 2015.

According to the "2014 White Paper on Small and Medium Enterprises," among Taiwan's small and medium enterprises, sole proprietorships and partnerships account for more than half of all organizational forms at 57.53% (of which 1.85% are partnerships and 55.68% are sole proprietorships), employing a considerable number of workers. However, according to the Ministry of Finance's public announcement of the "Maximum Standards for Business Borrowing Interest Rates and Usual Levels of Employee Salaries for Fiscal Year 2014," the usual level of employee salaries for general employees of sole proprietorships or partnerships is capped at NT$50,000, and any amount exceeding this will not be recognized by the tax authorities.

If the wage-increase tax-reduction provisions of the Small and Medium Enterprise Development Statute are amended and passed but the related supporting amendments are not put in place, sole proprietorships and partnerships responding to the wage-increase policy by raising wages for entry-level employees may face the predicament of wage increases stalling at NT$50,000, or those whose salaries are exactly NT$50,000 being unable to receive a raise.

Therefore, at this meeting, the Ministry of Economic Affairs specifically joined hands with the Ministry of Finance to review and appropriately relax the ceiling on salary reporting for general employees of sole proprietorships and partnerships under the "Maximum Standards for Business Borrowing Interest Rates and Usual Levels of Employee Salaries," so as to implement the Executive Yuan's policy intent of encouraging wage increases.

In addition to the aforementioned discussion cases, regarding the report cases, the report cases at this meeting, apart from routine reports such as the status of implementation of resolutions from the previous (18th) meeting and the status of committee member reappointment, also put forward report cases addressing issues of concern to small and medium enterprises, including:

1. Summary explanation of the 2014 White Paper on Small and Medium Enterprises; the government will continue to compile and publish the SME white paper so that all sectors can grasp the operational and developmental trends of small and medium enterprises;

2. Status of regulatory adjustment for small and medium enterprises in 2014; the Small and Medium Enterprise Administration has handled 82 regulatory or policy opinions, with assistance covering multiple suggestions including "disclosure of green electricity price subscription information";

3. Status of financing assistance for small and medium enterprises in 2014; the government has particularly strengthened financing guarantee assistance for emerging industries, cultural and creative industries, startup enterprises, youth entrepreneurship, and disadvantaged groups. As of the end of October, the SME credit guarantee mechanism had assisted 320,000 cases; from January to October 2014, the Credit Guarantee Fund provided guarantees for a total of 329,332 financing cases, enabling 100,700 small and medium enterprises to obtain operating capital, of which 13,283 were newly guaranteed accounts, with guaranteed amounts of NT$936.6 billion and assistance in obtaining funds of NT$1,167.3 billion.