After referring to comments from all walks of life in the public hearings and a careful assessment, the Council of Agriculture (COA) and the National Development Council take the initiative in amending the Draft of the Special Act for Free Economic Pilot Zones (FEPZ). It is expected, through legalization of special act draft, to implement the policy of pilot zones and boost the upgrading of Taiwan’s agriculture.

Since the Draft of the Special Act for Free Economic Pilot Zones was sent from the Executive Yuan to the Legislative Yuan for review at the end of December in 2013, the Legislative Yuan has hosted five public hearings. Among them, the “Value-added Agriculture” public hearing was held on April 10, 2014. The experts and scholars who attended it showed some concerns. In the pilot zones, 10% of foreign products sold on domestic market can be exempted from the enterprise income tax, which might result in an unfair competition among companies inside and outside the zones. There is seemingly no examination mechanism in the policy of value-added agriculture, which might damage domestic agriculture. When the ornamental fish industry is developed in the pilot zones, the concept of environmental protection should be taken into account.

Article 33 of the Draft of the Special Act for Free Economic Pilot Zones--10% of products sold on domestic market are exempted from the enterprise income tax--excludes agricultural products

According to Article 33 of the Draft of the Special Act, foreign profit-seeking enterprises engaged in storage or simple processing in the pilot zones can enjoy a preference that up to 10% of the products sold on domestic market can be exempted from the enterprise income tax. This act is originally a preferential policy for the development of logistics industry in the free trade zones. Since its practice till today, there has been no case related to agriculture yet.

The COA states that promoting the value-added agriculture policy in the pilot zones is aimed to develop some industries based on agriculture with increasing added value, such as ornamental fish and peripheral sectors, agricultural biotechnology (like animal vaccine), as well as deep processing of fishery and livestock. It is different from simple processing of cutting, grinding and drying. Therefore, the policy is not applicable to the aforementioned preferential tax exemption that focuses on simple processing. However, in order to resolve the doubts, the COA proposes to amend Article 33 of the Draft of the Special Act, explicitly excluding agricultural products sold on domestic market from tax-exempted ones.

Article 47 of the Draft of the Special Act for Free Economic Pilot Zones narrows its subject from “wildlife or their products” to “ornamental aquatic animals” and needs being examined by the central authority

Regarding conservation groups’ concern that the pilot zones may exclude the application of Wildlife Conservation Act, the COA notes that Article 47 of the Draft of the Special Act intends to enhance international competitiveness of the ornamental fish and peripheral industries. In order to relax application requirements and make the subject more explicit inside the pilot zones in the future, the COA accepts the public comment, clearly narrows “wildlife and their products” into “ornamental aquatic animals,” and submits it to the central authority for review. By doing so the COA can achieve the purpose of boosting the ornamental fish industry while accomplishing the goal of protecting animals, maintaining biological diversity and keeping natural ecological balance.

Inspection and quarantine regulations in the pilot zones are not relaxed; the COA will draw up review principles applicable to companies stationed inside, taking account of domestic agricultural development simultaneously

The inspection and quarantine regulations of imported raw materials are not relaxed in the pilot zones. In order to strengthen policy statement and avoid unnecessary worries, the COA will explain clearly in Article 41 of the Draft that inspection and quarantine belong to national security and public health, so that their regulations will not be relaxed. The COA expresses its determination to emphasize food safety and consumer health, as well as to protect domestic animals and plants against foreign diseases.

Some scholars and experts question that the policy of value-added agriculture in the pilot zones might make domestic agricultural products being replaced. The COA replies by reiterating that the policy of pilot zones is a kind of hedging policy in response to future liberalization. Foreign raw materials, whose value is added in the pilot zones, are exported only to other countries. This can avoid direct impact of large quantities of imported raw materials on domestic agricultural products. Moreover, the opportunity to use domestic agricultural products increases too. Therefore, it is a measure that also benefits local agriculture.

The COA consents that, in Article 9 Paragraph 2 of the Draft of the Special Act that authorizes the authority to draw up review regulations applicable to companies stationed inside the pilot zones, it will state clearly the review principles of agricultural value-added business. They include whether products manufactured by companies in the pilot zones are export-oriented, whether the purchase amount of domestic agricultural raw materials equals to the import amount, etc. The goal is to help local agricultural industry's development as well as achieve a win-win situation for local farmers as well as the agricultural industries.