The Status of Taiwan's Regulations Concerning with Access to Biological Resources

Preface

In actual practice, the research and development of biotech medicine, food, and environmental products cannot be done by in-lab researches. This is a unique character of the biotechnology industry. To get the research going, the researchers need to search for and exploit new biological materials and, samples outside the lab. Therefore, the access to and management of biological resources have significant impact on the stimulation and development of national biotech industry.

Ever since the enforcement of Convention on Biological Diversity (CBD) in 1992 by 172 countries, a general principal about conserving biological diversity and using biological resources has been set. According to CBD, States have sovereign rights over their own biological resources. CBD also encourages each State to access to and manage the biological resources conformed with the principals of conservation, sustainability, NOEL environment friendly, and adequate sharing of benefit arising from biological resources. Therefore, issues such as environmental protection and sustainability have become political issues internationally.

If the ABS system for the access to biological resources is designed too strictly, the establishment of the system will make the research and development staffs and related institutions hang back with hesitation both domestically and internationally. Their intention of bioprospecting in the designated country will then be reduced. On the other hand, if the system is designed too loosely, it will not be able to protect the rights of the owner of the resources. As a result, currently, every country holds a cautious attitude in setting up the regulations of managing the access to biological resources.

Currently, many countries and regional international organizations already set up ABS system, such as Andean Community, African Union, Association of Southeast Asia Nations (ASEAN), Australia, South Africa, and India, all are enthusiastic with the establishment of the regulations regarding the access management of biological resources and genetic resources. On the other hand, there are still many countries only use traditional and existing conservation-related regulations to manage the access of biological resources. Since it has been more than 10 years that the regulation of access to biological resources and benefit sharing has been developed in some countries, how is Taiwan's current situation regarding this issue?

Taiwan's Existing Regulations on the Access to Bioloical Resources

In terms of regulations, Taiwan's existing management style of the access to biological resources is similar to that of the US and the EU. It refers to the existing regulations on environmental protection and conservation, and evaluates from the perspective of environmental protection to control and manage the exploitation and application of the related biological resources. These regulations include the Wildlife Conservation Act, theNational Park Law, the Forestry Act, the Cultural Heritage Preservation Act, and the Aboriginal Basic Act. The paragraphs below describe the contents of the acts mentioned that are related to the access to biological resources.

1 、 Wildlife Conservation Act

According to the Wildlife Conservation Act, the Protected Species and the products made of cannot be hunted, traded, owned, imported, exported, raised, bred, and processed unless the number of protected wildlife has exceeded the amount the environment permits, or carry the objectives of academic research and education with the permits of central or regional authorities. As for the hunting of General Wildlife, pre-application and approval is needed with the exception of projects based on the objectives of academic research or education.

In addition, the import and export of the living wildlife and the products of Protected Wildlife are restricted to the condition of being permitted by management authority. With respect to the import and export of living Protected Wildlife, Academic research institutions and colleagues are the only person who can seek for the approval of management authority before they proceed.

2 、 National Park Law

The design and management of Taiwan's national parks are based on the regulations listed in the National Park Law with the purpose of protecting our country's exclusive natural scenery, wildlife and historical spots. Based on the properties and the nature of resources, the national park management structures the preserved area into general control area, playground and resting area, spot of historical interest, special landmark area, and ecological protection area. Ecological protection area refers to the areas where the natural surroundings, creatures, the society they live and propagate are strictly protected only for the research of ecology.

According to the regulation of National Park Law, inside the national park area, it is prohibited to hunt animals, fish, take off flowers or trees, not to mention the behaviours that are prohibited by the management authority. Exceptions are made based on the conditions of preserved areas and for the research purposes. In the general control area or resting area, the national park authority allows fishing or other activities agreed by the authority. However, these activities are prohibited in the preserved area of historical interest, special landmark area, and ecological protection area. To suit special purposes, in the special landmark area or ecological protection area, collection of specimens is allowed subject to the approval of authority. Under the purpose of academic research, better management of public safety, and special management of national park, the Ministry of the Interior will permit the collection of specimen. However, to enter the ecological protection area, one must obtain the permission of authority.

3 、 Forestry Act

To protect the forest resources and to maximize the public welfare and economic effectiveness, some of the properties are classified as forestry land and being managed by authority. Based on the Forestry Act, management authority has to restrict the area of cutting timber and to identify the area or period of restricted digging of greensward, tree roots, and grass roots, based on the condition of the forest. In addition, to maintain the current ecological environment in the forest, and to preserve the diversity of species, identification of natural preserved area is needed inside the forestland. The entrance and exit of human and vehicles are controlled based on the nature of the resources inside the preserve area. Unless obtaining the approval from the management authority, not a single activity of damaging, logging or digging soil, stones, greensward and roots is allowed.

Furthermore, any unauthorized activity of collecting specimen inside the forest recreation area and natural reserve will be fined. Collecting flowers and plants in these areas, or trespassing the natural reserve will also be fined. Only the activities taken by the aborigines to sustain their living or accommodate their customs are not restricted.

4 、 Cultural Heritage Preservation Act

The objectives of setting up the Cultural Heritage Preservation Act are to preserve and apply the cultural resources, to enrich the spiritual lives of citizens, and to add glory to the existing diverse cultures. The Cultural Heritage Preservation Act classifies the natural landscape and scenery as cultural assets. Vistas of Natural Culture refer to the natural areas, landforms, plants and mineral which contain the values of preservation. It can be further grouped into natural preserved area and natural monuments. Since the natural monuments include the unusual plants and mineral, it is connected to the management of biological resources.

According to the Cultural Heritage Preservation Act, unless approved by the management authority, it is prohibited to collect, log, destroy the plants or bio resources classified as natural monuments or trespass into the area of natural preserve. For the purposes of academic research, or for the memorial ceremony of aboriginal custom, research institute and the aborigines can collect the natural monuments without the approval of authority.

5 、 Aboriginal Basic Act

To protect the basic rights of the aborigines, and to sustain and develop the aboriginal society, the Aboriginal Basic Act was designed and enacted. The government not only admits the aborigine's rights in lands and natural resources, but also permits the non-profit behaviour such as hunting of wildlife, colleting of wild plants and fungi for the objective of complying with traditional culture, ceremony or private uses.

In addition, the Aboriginal Basic Act provides the requirement of Prior Informed Consent (PIC) to require government or private individual to inform the aborigines before they proceed with land development, resource exploitation, ecological preservation, and academic research in the land where the aborigines live. They need to consult and obtain the aborigines' agreement or participation, and to share the related interests derived from this project. In the case of restricting the aborigine's right of the use of land or natural resources by law, the government,shall consult with the aborigines or the tribe and reach the agreement.

When the government wish to design and establish national park, national scenic area, forestry area, ecological protection area, recreational area, or other resource management authorities, the government should obtain the agreement from the local aborigines and to build up the co-management mechanism.

※The Status of Taiwan's Regulations Concerning with Access to Biological Resources,STLI, https://stli.iii.org.tw/en/article-detail.aspx?no=105&tp=2&i=168&d=6139 (Date:2024/04/24)
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An Analysis of the Recusal Mechanism in the Latest Revision of the Government Procurement Act and Regulations Governing Procurements for Scientific and Technological Research and Development

An Analysis of the Recusal Mechanism in the Latest Revision of the Government Procurement Act and Regulations Governing Procurements for Scientific and Technological Research and Development 1. Introduction   Article 1 of the Government Procurement Act (hereinafter referred to as the Act) reveals that “This Act is enacted to establish a government procurement system that has fair and open procurement procedures, promotes the efficiency and effectiveness of government procurement operation, and ensures the quality of procurement.” Therefore, a recusal mechanism for reviewing qualification/disqualification of tenders and bidders is highly essential, for example, the head of the agency or its related persons should disclose the conflict of interests. After amended and promulgated on May 22, 2019 (Presidential Decree Hua-tzung-1 Yi No. 10800049691), the Act was revised with the identical legislative principle of the Act on Recusal of Public Servants Due to Conflicts of Interest. In other words, a more flexible and transparent mechanism has been adopted, which is more advanced and ideal for both procurement authority and external supervisors. 2. The New Recusal Mechanism of the Act Enhances the Flexibility and Transparency   The revision struck out the Paragraph 4, Article 15 of the Act, and the regulation related to the recusal mechanism shall be comply with the Act on Recusal of Public Servants Due to Conflicts of Interest, especially the qualification/disqualification provision of the “related persons.” The new government procurement procedure adopted a more flexible and transparent practice, “disclosure in advance and publication afterwards.” The detailed analysis is as follows. (1) Before the Act amended, the personnel of a procuring entity and its related persons shall withdraw themselves from the procurement.   Before the Act amended, the personnel of a procuring entity and its related persons shall withdraw themselves from the procurement. According to the previous Paragraph 4 of Article 15 (4), “Suppliers or persons in charge shall not participate in the procurement if they have connections with the agency’s head described in Paragraph 2. However, if the implementation of this paragraph is against fair competition or public interest, the exclusion can be exempted with the authority’s approval.” The Paragraph 2 mentioned specified, “The personnel of a procuring entity shall withdraw themselves from procurement and all related matters thereof if they or their spouses, relatives by blood or by marriage within three degrees, or family members living together with them have interests involved therein.” Simply put, legislators considered that suppliers or persons in charge shall not participate in an agency's procurement if they have conflict of interests with its head. For instance, the spouses, all the relatives within the third degree by consanguinity (blood) or by affinity (marriage), or family members living together with the head of the agency, cannot involve in the procurement of the agency. Furthermore, if a legal entity or an organization is directed by the relatives of the head of a government agency mentioned, it is disqualified from the procurement. (2) After the Act amended, the recusal of related persons substituted by self-disclosure and information publication norms   According to the Amendment, the Act was amended because the content of the article is existed in Article 9 of Act on Recusal of Public Servants Due to Conflicts of Interest; thus, Article 15 of the Act is hereby deleted. Recalling Article 9 of the previous Act on Recusal of Public Servants Due to Conflicts of Interest, “A public servant and his related persons shall not conduct transactions such as subsidizing, sales, lease, contracting, or other transactions conducted with consideration with the organ with which the public servant serves or the organs under his supervision.” For this reason, the amendment to Article 15 of Government Procurement Act is to regulate the mechanism of withdrawal of relevant parties by Article 14 of the existing Act on Recusal of Public Servants Due to Conflicts of Interest. However, the amendment of this article is greatly affected by the interpretation of judicial court no. 716, so it is necessary to briefly describe its key points as follows.   On the basis of the Judicial Yuan Justice Interpretation No. 716 [Transactions between public officials and their associates and service agencies shall be prohibited), adopting a constitutional interpretation of Article 9 of Act on Recusal of Public Servants Due to Conflicts of Interest, grand justice agreed this article does not contradict the proportion principle of article 23 of Constitution of the Republic of China (Taiwan), and it does not violate Article 15 “The right of existence, the right of work, and the right of property shall be guaranteed to the people” and Article 22 “All other freedoms and rights of the people that are not detrimental to social order or public welfare shall be guaranteed under the Constitution”, either. However, for public officials, if they are not allowed to participate in trading competition, it will result in the monopoly of other minority traders, which is not conducive to the public interest. Therefore, this interpretation holds that if the agency has conducted open and fair procedures in the transaction process, and there is sufficient anti-fraud regulation, whether there is still a risk of improper benefit transmission or conflict of interest, and it is necessary to prohibit the transaction of public officials' associates, the relevant authorities should make comprehensive review and improvement as soon as possible.   Accordingly, following interpretation no. 716, Act on Recusal of Public Servants Due to Conflicts of Interest was amended and published with 23 articles on 13 June, 2018. The withdrawal of interested parties is provided for in Article 14 and an additional six exceptions are provided, including: (1) The procurement carried out by public notice under the Government Procurement Act or pursuant to Article 105 of the same Act. (2) The property right in interest created for the procurement, sale by tender, lease by tender or tender solicitation carried out by public notice in a fair competitive manner pursuant to laws. (3) Subsidy requested in the legal capacity under laws; the subsidy to the public servant’s related person in an open and fair manner pursuant to laws, or the subsidy which might be against the public interest if it is prohibited and is granted subject to the competent authority’s approval. (4) The subject matter of the transaction is provided by the organ with which the public servant serves or the organs under his supervision, and traded at the official price. (5) The lease, acquisition, discretionary management, improvement and utilization of national non-public real estate requested by the state-owned enterprise in order to execute the national construction projects or public policies, or for the purpose of public welfare. (6) The subsidy and transaction under the specific amount.   The above amendments make the transactions between public officials and related parties that should be avoided in the past partially flexible now. In accordance with Paragraph 2 of the same article, in the case of the first three paragraphs of the proviso of Paragraph 1, the applicant or bidder shall voluntarily state his/her identity in the application or tender documents. After the subsidy or transaction is established, the agency shall disclose it together with its identity. That is to say, the self-disclosure is required beforehand and the information will go public afterwards to meet public expectations of transparency. This is also conducive to the supervision of all sectors, and conforms to the intention of the grand justice’s interpretation.   The reason why there is no need for government procurement to withdrawal is that the announcement process of the procurement is made in accordance with Government Procurement Act (including open tendering, selective tendering and restricted tendering through the announcement). There are strict procedures to follow and there is no conflict between the conflict of interest of public officials and the spirit of legislation. As to Paragraph 2 of other legal orders, the property right in interest created for the procurement, sale by tender, lease by tender or tender solicitation carried out by public notice in a fair competitive manner pursuant to laws. The legislative explanations are exemplified by the procurement (e.g. procurements for scientific and technological research and development) handled by the announcement in accordance with Fundamental Science and Technology Act. 3. Conclusion: It is suggested that relevant withdrawal regulations should be amended as soon as possible in procurements for scientific and technological research and development   The strike-out of the recusal provision of the Act does not mean that government procurement stoke out the recusal mechanism. The recusal mechanism is still stated in Article 14 of Act on Recusal of Public Servants Due to Conflicts of Interest. In addition to the advantages of the same regulations on the prohibition of transactions between related parties, it also enables the regulators with open and fair procedures and sufficient prevention of fraud, such as government procurement, to avoid evading so as not to harm the public interest. At the same time, supplemented by open and transparent disclosure, the amendment is a positive change of legislation.   Meanwhile, this paper believes that Government Procurement Act has adopted the mechanism of flexibility and transparency requirements for the procurement object avoidance regulations, and procurements for scientific and technological research and development should revise relevant withdrawal regulations as soon as possible. In accordance with Paragraph 4 of Article 6 of Fundamental Science and Technology Act and the authorization, Regulations Governing Procurements for Scientific and Technological Research and Development (hereinafter referred to as the regulatory regulations) is established. According to Article 8 (2) and (3) of the regulation, a responsible person, partner, or representative of the public school, public research institute (organization), or juristic person or entity performing the scientific research procurement may not serve as a responsible person, partner, or representative of the supplier. The supplier and the juristic person or entity performing the scientific research procurement may not at the same time be affiliated with each other, or affiliated to the same other enterprise. From the perspective of the article structure, the withdrawal regulation for scientific research procurement is within the norm of Article 15 of Government Procurement Act before the amendment, but it includes regulations for affiliated enterprises, which is not included in Article 15. The amendment to Article 14 of Act on Recusal of Public Servants Due to Conflicts of Interest also states that the proviso of Paragraph 1 of scientific research procurement “other procurements that are regulated by fair competition and by means of an announcement procedure” can also prove that the mechanism for scientific research procurement should adopt this provision. Therefore, it is recommended that the original procurements for scientific and technological research that is independent from Government Procurement Act should be amended by the competent authority as soon as possible in order to comply with the relevant provisions of Article 8 of Regulations Governing Procurements for Scientific and Technological Research and Development and to comply with the original intention of the Regulations Governing Procurements for Scientific and Technological Research and Development, and to avoid stricter regulations on scientific procurement than government procurement. Meanwhile, it is in accordance with the spirit of the grand justice’s interpretation No. 716.

Introduction to Tax Incentive Regime for SMEs

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Whilst Article 10 of the Statute for Industrial Innovation has provided tax cuts for R&D expenditures, these incentives are not focus on SMEs and hence not supportive to their research and innovations. This was the reason for the 2016 amendment of the Act for Development of Small and Medium Enterprises added Article 35 to offer tax incentives in order to encourage R&D and innovative efforts and Article 35-1 to activate intellectual properties via licensing. These articles aim to accelerate the momentum of innovations and transformations which promoting investments for SMEs. OthersTo assist SMEs to cope with change of the business environment, the Article 36-2 added the tax incentives for salary or headcount increases, to contribute to the sustainability of SMEs and stabilize the labour market and industrial structures. Following is an explanation of the applicability of these schemes and the requirements to qualify such incentives. III. Tax Incentives to Promote Investments (I) Tax deductions for R&D expenditures   Governments around the world seek to encourage corporate R&D activities, that Tax incentives are put in place to reduce R&D costs and foster a healthy environment of investment for more R&D initiatives. Neighboring countries such as Japan, Korea and Singapore are frequently practicing belowing tax burdens to encourage R&D efforts. Article 35 of the Act for Development of Small and Medium Enterprises in Taiwan allows accelerated depreciation and offers tax cuts[2] to stimulate R&D and innovations and create an investment friendly environment for SMEs. 1. Taxpaying Entities and Requirements (1) Qualifications for SMEs   Article 35 of the Act is applicable to qualified SMEs and individual taxpayers, which are (1) from manufacturing, construction & engineering, mining and quarrying industries, with paid-in capital below or equal to NT$80 million or with the number of full-time employees less than 200 people; (2) from other industries with the sales of the previous year below or equal to NT$100 million or with the number of full-time employees less than 100 people. Thus, the qualifications of Small and Medium Enterprises are based on either paid-in capital/sales or number of employees under the Act[3].Meanwhile, SMEs may not have an independent R&D department due to the limit of size or operating cost.Therefore, if the taxpayers hiring full-time R&D personnel that can provide records of job descriptions and work logs to R&D activities, the SMEs can access the tax incentives provided that the R&D functions. The recognized by government agencies is increasingly flexibility for SMEs seeking policy support. 2. Taxpayers and requirements (1) A certain degree of innovativeness   As the tax incentive regime strives to promote innovations, the R&D expenses should be used to fund innovative developments. According to the official letters from the Small and Medium Enterprise Administration, Ministry of Economic Affairs, there is no high bar as forward-looking, risky and innovative as usually” required for other incentives previously, which is considering the size of SMEs and their industry characteristics. The “certain degree” of innovativeness shall be based on industry environments and SME businesses as determined by competent authorities in a flexible manner. (2) Flexibility in the utilization of business income tax reductions   To encourage regular R&D activities, The case that SMEs may not have R&D undertakings each year due to funding constraints, or start-up company may have incurred R&D expenditures but are not yet profitable and hence have no tax liabilities during the year, Corporate taxpayers were able to choose beside deduct the payable taxes during a single year, and reduce the payable taxes during the current year over three years starting from the year when tax incentives are applicable. 3. Tax incentive effects   As previously mentioned, Article 35 of the Act for Development of Small and Medium Enterprises accommodates the characteristics of SMEs by allowing reductions of corporate business taxes for up to 15% R&D expenditures during the current year, or spreading the tax reductions by spreading up to 10% of the R&D expenditures over three years from the first year when the incentives are applicable. It is worth noting that the tax deductions shall not exceed 30% of the payable business income taxes during a single year.   If the instruments and equipment for R&D, experiments or quality inspections have a lifetime over two years or longer, it is possible to accelerate the depreciation within half of the years of service prescribed by the income tax codes for fixed assets. However, the final year less than 12 months over the shortened service years shall not be counted. Accelerated depreciation brings in tax benefits for fixed asset investments during the initial stage, that meets the requirements for new technologies and risk management by frontloading the equipment depreciation and creates a buffer for capital utilization. (II) Deferred taxations on licensing/capitalization of intellectual properties   The deferral of tax payments under the Act for Development of Small and Medium Enterprises is meant to avoid any adverse effect on the application of technological R&Ds by SMEs. As the equity stakes via capitalization of intellectual properties by inventors or creators are not cashed out yet and the subsequent gains may not be at the same valuation as determined at the time of capitalization, the immediate taxation may hinder the willingness to transfer intellectual properties. Therefore, assisting SMEs to release intellectual properties with potential economic value, the licensing and capitalization of intellectual properties is strongly encouraged. The tax expenses shall be deferred within SME or an individual acquires stakes on a non-publicly-listed company by transferring their intellectual properties.   This is to stimulate the applications and sharing of relevant manufacturing technologies. When an SME or an individual acquires stakes on a non-publicly-listed company by transferring their intellectual properties, their tax expenses shall be deferred. 1. Taxpayers and requirements (1) Qualifications for individuals or SMEs   Article 35-1 of the Act for Development of Small and Medium Enterprises is applicable to SMEs and individual taxpayers. This is to foster the growth of SMEs and enhancement of industry competitiveness by encouraging R&D and innovations from individuals and start-ups. To promote the commercialize of intellectual properties in different ways, the Act for Development of Small and Medium Enterprises provides income tax incentives to individuals and SMEs transferring intellectual properties. The purpose is to encourage different paths to industry upgrades. (2) Ownership of intellectual properties   To ensure that the proceeds of intellectual property is linked to the activity of intellectual properties which perform by individuals or SMEs. Only the owners of the intellectual properties capitalized and transferred can enjoy the tax benefits.   Intellectual properties referred to in the Act for Development of Small and Medium Enterprises are the properties with value created with human activities and hence conferred with legal rights. These include but are not limited to copyrights, patent rights, trademarks, trade secrets, integrated circuit layouts, plant variety rights and any other intellectual properties protected by laws[4]. (3) Acquisition of stock options   The abovementioned tax incentives are offered to the individuals or SMEs who transfer intellectual properties to non-listed companies in exchange of their new shares. The income taxes on the owners of intellectual properties are deferred until acquisition of shares. These shares are not registered with the book-entry system yet. Before the transferrers of intellectual properties dispose or offload these shares, immediate taxations will impose economic burdens and funding challenges given the unknown prices of the eventual cash-out. 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However, the levy of income taxes at the time of intellectual property transfers and new share acquisitions may cause a sudden jump in taxes payable in the progressive system and thus a burden on the economics of SMEs and individuals concerned. Thus, to avoid disruptions to company operations or personal finance planning, Article 36 makes the exception for the incomes earned by subscribing to new shares as a result of transferring intellectual properties. Such incomes are not subject to taxes during the year when the shares are acquired, in order to mitigate the tax barriers concerned.   In sum, the taxes shall be paid when such shares are transferred, gifted or distributed. 3. Tax incentive effects   Article 35-1 of the Act for Development of Small and Medium Enterprises provides tax incentives to stimulate the mobilization of intellectual properties by smoothing out the impact of income taxes payable. This is applicable to (1) SMEs who can postpone the business income taxes payable from the year when they acquire new shares of non-listed companies by transferring the intellectual properties they own; (2) individuals who can postpone the individual income taxes payable from the year when they acquire new shares of non-listed companies by transferring the intellectual properties they own. IV. Tax incentives aiming to improve the business environment (I) Tax reductions for wages to additional headcounts   SMEs are vital to the Taiwan, making uo 90% of the companies accounting in Taiwan, who employ more than 6.5 million people or 72.8% of the total workforce. Any economic recession may make it difficult for SMEs to maintain their labor costs given their smaller funding size and external challenges. This will cause higher unemployment rates and hurt the economy, which may cause impairment of the capacity or create a labor gap for SMEs, eventually shrink the industry scale. To lower the burden of operational and investment costs and learn from the legislatives in Japan and the U.S.[6], tax incentives are put in place as a buffer for adverse effects of external environments. The first paragraph of Article 36-2 of the Act for Development of Small and Medium Enterprises provide tax incentives for employee salaries of new headcounts based on the assessment on the economy over a time period. This is intended to encourage domestic investments and avoid the pitfall of direct government subsidies distorting salary structures. It is hoped that investments from SMEs can stimulate the momentum of economic growth. 1. Taxpayers   The tax incentives under Article 36-2 of the Act for Development of Small and Medium Enterprises aim to assist SMEs through difficult times in an economic downturn. The threshold of the period time is based on the unemployment rate has been below the economic indicator predetermined for six consecutive months, which calculated by the Directorate General of Budget, Accounting and Statistics, Executive Yuan. In number of the unemployment rate has been below the economic indicator predetermined for six consecutive months, it is deemed that the business environment is not friendly to SMEs. In this instance, the Regulations for the Tax Preferences Provided to Small and Medium-sized Enterprises on Additional Wage Payment will trigger the tax incentives. The abovementioned economic indicator shall be published by the competent authorities once every two years.   Moreover, to qualify for the tax incentives for new employees, SMEs should investing new ventures or instill new capital by at least $500,000[7] or hiring workforce at least two full-time headcounts compared with the previous fiscal year, that constitute at the Article 36-2 of the Act for Development of Small and Medium Enterprises, which aims to encourage SMEs investments. 2. Taxpayers (1) Qualifications of additional headcounts   As the dispatched human resource services typically meet temporary or short-term requirements and contractors do not enjoy employment security, this is not consistent with the spirit of the legislation to create jobs and reduce unemployment. Therefore, to avoid the one-time increase of headcounts from accessing the tax reductions during the year and the deterioration of labor relations in Taiwan. Tax incentive is not offered to the additional recruitment of part-time or contracted workers.   Meanwhile, the tax incentives are only applicable to the additional employment of Taiwanese nationals, above or below 24 years old. A tax deduction of 50% based on annual wages is provided for the hiring of people below 24 years old. The extra tax deduction will stimulate young employment. (2) Definition of additional employment   The number of additional headcounts is based on permanent hires and calculated as the difference between the average number of Taiwanese employees covered by labor insurance per month throughout a single fiscal year or before and after the incremental increase of workforce. The conversion of regular contracts to indefinite employment in writing or signing up for indefinite R&D headcounts under the military service scheme can also be deemed as additional employment. It is worth noting, however, the new headcounts resulted from M&A activities or transfer between affiliated companies are excluded in this legislation. (3) Calculation of wages   Companies are also required to increase employment as well as the Comparable Wages. The comparable wages are estimated with the summation of 30% of the wages for the year before and after additional employment that based on the aggregate of the new hires comparable wages compared to the prior year. In other words, if the aggregate wages paid out are higher than comparable wages during the year, the companies concerned have indeed incurred higher personnel expenses. Tax incentives are thus granted because it improves the business environment and it is the purpose of this legislation. 3. Tax incentive effects   The first paragraph of Article 36-2 of the Act for Development of Small and Medium Enterprises provides deductions of business income taxes during the year to qualified SMEs at an amount equivalent to 130% of the incremental wages paid to new headcounts who are Taiwanese nationals. The deductible amount is equivalent to 150% of the incremental wages if new headcounts are Taiwanese nationals below 24 years old. (II) Tax incentives for companies that increase salaries   Companies are subject to the effect of changes in the external factors such as global supply and demand on the international market, as well as the domestic business environment as a result of risk aversion from investors and expectation from customers. These uncertainties associated with investments and the rising prices for consumers will suppress the wage levels in Taiwan. This the reason why the second paragraph of Article 36-2 of the Act for Development of Small and Medium Enterprises grants tax deductions for the companies who increase salaries, to encourage companies share earnings with employees and enhance private-sector consumption. SMEs may deduct their business income taxes payable during the year up to 30% of salary increase for existing entry-level employees who are Taiwanese nationals, not as a result of statutory requirement for basic wage adjustments. 1. Taxpayers   The tax incentives are applicable to SMEs as defined by the Regulations for the Tax Preferences Provided to Small and Medium-sized Enterprises on Additional Wage Payment and based on the same economic indicators previously mentioned. 2. Qualification for tax incentives (1) Definition of entry-level employees   The object of taxation under this act is the enterprise's average wage payment to the entry-level employees. The entry-level employees referred to in this act are authorized by the "Small and medium-sized enterprise employee salary increase, salary deduction act " that refers to employees of local nationality with an average monthly recurring salary below nt $50,000[8] whose were entered into indefinite employment contracts with SMEs. Through such conditions, the effect of tax concessions will be concentrated on promoting the salary level of grassroots staff and helping enterprises to cope with changes in the industrial environment. (2) Average salaries   The salaries to entry-level employees refer to the basic salaries, fixed allowances and bonuses paid on a monthly basis. Payment-in-kind shall be discounted based on the actual prices and included into the regular salaries. Meanwhile, regular salaries should be calculated with annualized averages, as this legislation seeks to boost salary levels. The regular salaries to entry-level employees during the year are estimated with the monthly number of entry-level employees during the same year. Only when the average basis salaries during the year are higher than those in the prior year can the tax incentives be applicable. 3. Tax incentive effects   Applying this article, SMEs can deduct their business income taxes each year up to 130% of salary increase for existing entry-level employees who are Taiwanese nationals, which are not as a result of statutory requirement for basic wage adjustments. However, it is not allowed to double count the increased personnel expenses for new headcounts applicable to the first and second paragraphs of the same article. V. Conclusions   The funding scales and relatively weak financial structures are the factors that led SMEs be susceptible influenced by supply change dynamics and business cycles. To the extent that is suppressing the flexible in capital utilization for SMEs, also influencing on the sustainability of SMEs. Differ from government subsidies require budgeting, reviewing and implementations, there are complications regarding the allocation of administrative resources. Therefore, it is important to plan for tax incentives in order to stimulate R&D, innovation and job creation by SMEs and ultimately make SMEs more competitive.   The tax incentives to SMEs amended in 2016 by the Small and Medium Enterprise Administration are known for the following: (I) The lowering of thresholds for tax reductions of R&D expenses in order to encourage SMEs to invest in R&D activities with a “certain degree” of innovativeness and enhance the momentum for SMEs to upgrade and transform themselves; (II) Deferral the income taxations on the transfer of intellectual properties for equity, in order to encourage application and utilization of such intellectual properties, provide incentives for R&D programs or innovations by individuals and SMEs. This also creates a catalyst for industry upgrade; (III) Tax deductions for the employment of new headcounts or the increase of employee wages during the time the economic indicators have reached a certain threshold and based on the health of the investment environment. This is to encourage company investments and capital increases in Taiwan and mitigate the volatility of economic cycles, in order to get ready for business improvement.   The above tax incentive programs, i.e. tax deductions for R&D and innovations; deferral of taxations on the transfer of intellectual properties for equity; tax deductions for the hiring of new headcounts and the increase of employee salaries, are meant to boost the investment from SMEs and the competitiveness of SMEs. The Act for Development of Small and Medium Enterprises seeks to reduce tax burdens of SMEs actively investing for their future and competitive advantages. Tax incentives help to mitigate the adverse effect of the economy on the business environment. It is also the fostering of the sources of business income tax revenues for the government. This is the very purpose of the Act for Development of Small and Medium Enterprises. [1]White Paper on Small and Medium Enterprises in Taiwan, 2018, p21 (November 9, 2018) published by the Ministry of Economic Affairs [2]Pursuant to the authorization conferred by Article 35 of the Act for Development of Small and Medium Enterprises, the Ministry of Economic Affairs has announced the Regulations Governing the Reduction of Expenditures for Small and Medium Enterprises Research and Development as Investment. [3]Article 2 on the definition of SMEs. The abovementioned criterion is universally applicable to the Act for Development of Small and Medium Enterprises. It also applies to the eligibility of tax incentives to be introduced in this paper unless otherwise specified. [4]Official Letter Economic-Business No. 10304605790, Ministry of Economic Affairs [5]Official Letter Taiwan-Finance No. 10300207480, Ministry of Finance [6]“Assessment of the Taxations under Article 35, Article 35-1, the first paragraph and the second paragraph of Article 36-2, the Act for Development of Small and Medium Enterprises” published by the Small and Medium Enterprise Administration, Ministry of Economic Affairs, pages 15-17, https://www.moeasmea.gov.tw/files/2670/93B9AF54-84E2-4293-A5CA-EA7DD9FAA05A(most recently browsed date September 9, 2019). [7]Order of Interpretation Economics-Business No. 104004602510 from the Ministry of Economic Affairs: “Second, on the day when the economic indicator has reached the threshold, the paid-in capital of the new business should be at least NT$500,000 and there is no need to instill additional capital during the period when tax incentives are applicable. For existing businesses, there is no limitation on the number of capital increases during the applicable period. So long as the cumulative increase in capital reaches NT$500,000 and new employees are hired during the same fiscal year or during the prior fiscal year.” [8]Paragraph 1, Article 2 of the Regulations for the Tax Preferences Provided to Small and Medium-sized Enterprises on Additional Wage Payment

Impact of Government Organizational Reform to Research Legal System and Response Thereto (2) – Observation of the Swiss Research Innovation System

3.Commission of Technology and Innovation (CTI)   The CTI is also an institution dedicated to boosting innovation in Switzerland. Established in 1943, it was known as the Commission for the Promotion of Scientific Research[1]. It was initially established for the purpose of boosting economy and raising the employment rate, and renamed after 1996. The CTI and SNSF are two major entities dedicated to funding scientific research in Switzerland, and the difference between both resides in that the CTI is dedicated to funding R&D of the application technology and industrial technology helpful to Switzerland’s economic development.   Upon enforcement of the amended RIPA 2011, the CTI was officially independent from the Federal Office for Professional Education and Technology (OEPT) and became an independent entity entitled to making decisions and subordinated to the Federal Department of Economic Affairs (FDEA) directly[2]. The CTI is subject to the council system, consisting of 65 professional members delegated from industrial, academic and research sectors. The members assume the office as a part time job. CTI members are entitled to making decisions on funding, utilization of resources and granting of CTI Start-up Label independently[3].   The CTI primarily carries out the mission including promotion of R&D of industrial technology, enhancement of the market-orientation innovation process and delivery of R&D energy into the market to boost industrial innovation. For innovation, the CTI's core mission is categorized into[4]: (1)Funding technology R&D activities with market potential   The CTI invests considerable funds and resources in boosting the R&D of application technology and industrial technology. The CTI R&D Project is intended to fund private enterprises (particularly small-sized and medium-sized enterprises) to engage in R&D of innovation technology or product. The enterprises may propose their innovative ideas freely, and the CTI will decide whether the funds should be granted after assessing whether the ideas are innovative and potentially marketable[5].   CTI’s funding is conditioned on the industrial and academic cooperation. Therefore, the enterprises must work with at least one research institution (including a university, university of science and technology, or ETH) in the R&D. Considering that small-sized and medium-sized enterprises usually do not own enough working funds, technology and human resources to commercialize creative ideas, the CTI R&D Project is intended to resolve the problem about insufficient R&D energy and funds of small- and medium-sized enterprises by delivering the research institutions’ plentiful research energy and granting the private enterprises which work with research institutions (including university, university of science and technology, or ETH) the fund. Notably, CTI’s funding is applicable to R&D expenses only, e.g., research personnel’s salary and expenditure in equipment & materials, and allocated to the research institutions directly. Meanwhile, in order to enhance private enterprises' launch into R&D projects and make them liable for the R&D success or failure, CTI’s funding will be no more than 50% of the total R&D budget and, therefore, the enterprises are entitled to a high degree of control right in the process of R&D.   The industrial types which the CTI R&D Project may apply to are not limited. Any innovative ideas with commercial potential may be proposed. For the time being, the key areas funded by CTI include the life science, engineering science, Nano technology and enabling sciences, etc.[6] It intends to keep Switzerland in the lead in these areas. As of 2011, in order to mitigate the impact of drastic CHF revaluation to the industries, the CTI launched its new R&D project, the CTI Voucher[7]. Given this, the CTI is not only an entity dedicated to funding but also plays an intermediary role in the industrial and academic sectors. Enterprises may submit proposals before finding any academic research institution partner. Upon preliminary examination of the proposals, the CTI will introduce competent academic research institutions to work with the enterprises in R&D, subject to the enterprises' R&D needs. After the cooperative partner is confirmed, CTI will grant the fund amounting to no more than CHF3,500,000 per application[8], provided that the funding shall be no more than 50% of the R&D project expenditure.   The CTI R&D Project not only boosts innovation but also raises private enterprises’ willingness to participate in the academic and industrial cooperation, thereby narrowing the gap between the supply & demand of innovation R&D in the industrial and academic sectors. Notably, the Project has achieved remarkable effect in driving private enterprises’ investment in technology R&D. According to statistical data, in 2011, the CTI solicited additional investment of CHF1.3 from a private enterprise by investing each CHF1[9]. This is also one of the important reasons why the Swiss innovation system always acts vigorously. Table 1  2005-2011 Passing rate of application for R&D funding Year 2011 2010 2009 2008 2007 2006 2005 Quantity of applications 590 780 637 444 493 407 522 Quantity of funded applications 293 343 319 250 277 227 251 Pass rate 56% 44% 50% 56% 56% 56% 48% Data source: Prepared by the Study (2)Guiding high-tech start-up   Switzerland has learnt that high-tech start-ups are critical to the creation of high-quality employment and boosting of economic growth, and start-ups were able to commercialize the R&D results. Therefore, as of 2001, Switzerland successively launched the CTI Entrepreneurship and CTI Startup to promote entrepreneurship and cultivate high-tech start-ups. 1.CTI Entrepreneurship   The CTI Entrepreneurship was primarily implemented by the Venture Lab founded by CTI investment. The Venture Lab launched a series of entrepreneurship promotion and training courses, covering day workshops, five-day entrepreneurship intensive courses, and entrepreneurship courses available in universities. Each training course was reviewed by experts, and the experts would provide positive advice to attendants about innovative ideas and business models. Data source: Venture Lab Site Fig. 3  Venture Lab Startup Program 2.CTI Startup   The CTI is dedicated to driving the economy by virtue of innovation as its priority mission. In order to cultivate the domestic start-ups with high growth potential in Switzerland, the CTI Startup project was launched in 1996[10] in order to provide entrepreneurs with the relevant guidance services. The project selected young entrepreneurs who provided innovative ideas, and guided them in the process of business start to work their innovative ideas and incorporate competitive start-ups.   In order to enable the funding and resources to be utilized effectively, the CTI Startup project enrolled entrepreneurs under very strict procedure, which may be categorized into four stages[11]: Data source: CTI Startup Site Fig. 4  Startup Plan Flow Chart   In the first stage, the CTI would preliminarily examine whether the applicant’s idea was innovative and whether it was technologically feasible, and help the applicant register with the CTI Startup project. Upon registration, a more concrete professional examination would be conducted at the second stage. The scope of examination included the technology, market, feasibility and management team’s competence. After that, at the stage of professional guidance, each team would be assigned a professional “entrepreneurship mentor”, who would help the team develop further and optimize the enterprise’s strategy, flow and business model in the process of business start, and provide guidance and advice on the concrete business issues encountered by the start-up. The stage of professional guidance was intended to guide start-ups to acquire the CTI Startup Label, as the CTI Startup Label was granted subject to very strict examination procedure. For example, in 2012, the CTI Startup project accepted 78 applications for entrepreneurship guidance, but finally the CTI Startup Label was granted to 27 applications only[12]. Since 1996, a total of 296 start-ups have acquired the CTI Startup Label, and more than 86% thereof are still operating now[13]. Apparently, the CTI Startup Label represents the certification for innovation and on-going development competence; therefore, it is more favored by investors at the stage of fund raising. Table 2  Execution of start-up plans for the latest three years Quantity of application Quantity of accepted application Quantity of CTI Label granted 2012 177 78 27 2011 160 80 26 2010 141 61 24 Data source: CTI Annual Report, prepared by the Study   Meanwhile, the “CTI Invest” platform was established to help start-up raise funds at the very beginning to help commercialize R&D results and cross the valley in the process of R&D innovation. The platform is a private non-business-making organization, a high-tech start-up fund raising platform co-established by CTI and Swiss investors[14]. It is engaged in increasing exposure of the start-ups and contact with investors by organizing activities, in order to help the start-ups acquire investment funds. (3)Facilitating transfer of knowledge and technology between the academic sector and industrial sector   KTT Support (Knowledge & Technology Transfer (KTT Support) is identified as another policy instrument dedicated to boosting innovation by the CTI. It is intended to facilitate the exchange of knowledge and technology between academic research institutions and private enterprises, in order to transfer and expand the innovation energy.   As of 2013, the CTI has launched a brand new KTT Support project targeting at small-sized and medium-sized enterprises. The new KTT Support project consisted of three factors, including National Thematic Networks (NTNs), Innovation Mentors, and Physical and web-based platforms. Upon the CTI’s strict evaluation and consideration, a total of 8 cooperative innovation subjects were identified in 2012, namely, carbon fiber composite materials, design idea innovation, surface innovation, food study, Swiss biotechnology, wood innovation, photonics and logistics network, etc.[15] One NTN would be established per subject. The CTI would fund these NTNs to support the establishment of liaison channels and cooperative relations between academic research institutions and industries and provide small- and medium-sized enterprises in Switzerland with more rapid and easy channel to access technologies to promote the exchange of knowledge and technology between both parties. Innovation Mentors were professionals retained by the CTI, primarily responsible for evaluating the small-sized and medium-sized enterprises’ need and chance for innovation R&D and helping the enterprises solicit competent academic research partners to engage in the transfer of technology. The third factor of KTT Support, Physical and web-based platforms, is intended to help academic research institutions and private enterprises establish physical liaison channels through organization of activities and installation of network communication platforms, to enable the information about knowledge and technology transfer to be more transparent and communicable widely.   In conclusion, the CTI has been dedicated to enhancing the link between scientific research and the industries and urging the industrial sector to involve and boost the R&D projects with market potential. The CTI’s business lines are all equipped with corresponding policy instruments to achieve the industrial-academic cooperation target and mitigate the gap between the industry and academic sectors in the innovation chain. The various CTI policy instruments may be applied in the following manner as identified in the following figure. Data source: CTI Annual Report 2011 Fig. 5  Application of CTI Policy Instrument to Innovation Chain III. Swiss Technology R&D Budget Management and Allocation   The Swiss Federal Government has invested considerable expenditures in technology R&D. According to statistic data provided by Swiss Federal Statistical Office (FSO) and OECD, the Swiss research expenditures accounted for 2.37% of the Federal Government’s total expenditures, following the U.S.A. and South Korea (see Fig. 6). Meanwhile, the research expenditures of the Swiss Government grew from CHF2.777 billion in 2000 to CHF4.639 billion in 2010, an average yearly growth rate of 5.9% (see Fig. 7). It is clear that Switzerland highly values its technology R&D. Data source: FSO and OECD Fig. 6 Percentage of Research Expenditures in Various Country Governments’ Total Expenditures (2008) Data source: FSO and OECD Fig. 7  Swiss Government Research Expenditures 2000-2010 1.Management of Swiss Technology R&D Budget   Swiss research expenditures are primarily allocated to the education, R&D and innovation areas, and play an important role in the Swiss innovation system. Therefore, a large part of the Swiss research expenditures are allocated to institutions of higher education, including ETH, universities, and UASs. The Swiss research expenditures are utilized by three hierarchies[16] (see Fig. 8): Government R&D funding agencies: The Swiss research budget is primarily executed by three agencies, including SERI, Federal Department of Economic Affairs, Education and Research, and Swiss Agency for Development and Cooperation (SDC). Intermediary R&D funding agencies: Including SNSC and CTI. Funding of R&D performing institutions: Including private enterprises, institutions of higher education and private non-profit-making business, et al.   Therefore, the Swiss Government research expenditures may be utilized by the Federal Government directly, or assigned to intermediary agencies, which will allocate the same to the R&D performing institutions. SERI will allocate the research expenditures to institutions of higher education and also hand a lot of the expenditures over to SNSF for consolidated funding to the basic science of R&D. Data source: FSO Fig. 8  Swiss Research Fund Utilization Mechanism ~to be continued~ [1] ORGANIZATION FOR ECONNOMIC CO-OPERATION AND DEVELOPMENT [OECD], OECD Reviews of Innovation Policy: Switzerland 27 (2006). [2] As of January 1, 2013, the Federal Ministry of Economic Affairs was reorganized, and renamed into Federal Department of Economic Affairs, Education and Research (EAER). [3] The Commission for Technology and Innovation CTI, THE COMMISSION FOR TECHOLOGY AND INNOVATION CTI, http://www.kti.admin.ch/org/00079/index.html?lang=en (last visited Jun. 3, 2013). [4] Id. [5] CTI INVEST, Swiss Venture Guide 2012 (2012), at 44, http://www.cti-invest.ch/getattachment/7f901c03-0fe6-43b5-be47-6d05b6b84133/Full-Version.aspx (last visited Jun. 4, 2013). [6] CTI, CTI Activity Report 2012 14 (2013), available at http://www.kti.admin.ch/dokumentation/00077/index.html?lang=en&download=NHzLpZeg7t,lnp6I0NTU042l2Z6ln1ad1IZn4Z2qZpnO2Yuq2Z6gpJCDen16fmym162epYbg2c_JjKbNoKSn6A-- (last visited Jun. 3, 2013). [7] CTI Voucher, THE COMMISSION FOR TECHOLOGY AND INNOVATION CTI, http://www.kti.admin.ch/projektfoerderung/00025/00135/index.html?lang=en (last visited Jun. 3, 2013). [8] Id. [9] CTI, CTI Activity Report 2011 20 (2012), available at http://www.kti.admin.ch/dokumentation/00077/index.html?lang=en&download=NHzLpZeg7t,lnp6I0NTU042l2Z6ln1ad1IZn4Z2qZpnO2Yuq2Z6gpJCDeYR,gWym162epYbg2c_JjKbNoKSn6A--(last visited Jun. 3, 2013). [10] CTI Start-up Brings Science to Market, THE COMMISSION FOR TECHOLOGY AND INNOVATION CTI, http://www.ctistartup.ch/en/about/cti-start-/cti-start-up/ (last visited Jun. 5, 2013). [11] Id. [12] Supra note 8, at 45. [13] Id. [14] CTI Invest, http://www.cti-invest.ch/About/CTI-Invest.aspx (last visited Jun. 5, 2013). [15] KTT Support, CTI, http://www.kti.admin.ch/netzwerke/index.html?lang=en (last visited Jun.5, 2013). [16] Swiss Federal Statistics Office (SFO), Public Funding of Research in Switzerland 2000–2010 (2012), available at http://www.bfs.admin.ch/bfs/portal/en/index/themen/04/22/publ.Document.163273.pdf (last visited Jun. 20, 2013).

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