Taiwan considering expansion of import duty drawback (Taiwan)

To boost Taiwan’s flagging exports in the current fragile global economic conditions, by improving the competitiveness of its exporters, the government is considering whether to extend its import duty drawback program.

A drawback is made on customs duties on imported raw material, semi-manufactured goods and parts when they are used to produce goods that are later exported. Import duty refunds are reclaimable provided the imports are re-exported within one year. Effectively, the exporter is allowed to put its duty liabilities "on account”, to be cancelled against evidence of subsequent exports.

Taiwan began its duty drawback system in 1955, but it was then relaxed in better economic conditions. It was then resumed later last year to help several local industries, by providing drawback to some 1,200 items with a rate of import duty of more than 4.3%.

In a further attempt to reduce exporters’ production costs, Taiwan’s Ministry of Economic Affairs is now said to be mulling a relaxation of that 4.3% duty drawback threshold, or its complete elimination.

It was reported that a decision would depend on discussions between the various government agencies involved, because of the tax revenue implications. However, the Ministry of Finance appears to be in favour, and is providing its support to the measure. Discussions are likely to be held on whether the duty drawback should be targeted at specific industries, and whether exporters would be provided with significant benefits.