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The income gap between the top and bottom 20 percent is at its smallest since 2019 and has fallen for the first time in seven years.

The annual tax-deductible allowance for basic living expenses could be raised to NT$209,000 (US$6,473) per person next year, the Directorate General of Budget, Accounting and Statistics (DGBAS) said on Friday.

In its survey of family income and expenditure for last year, the median per capita disposable income was NT$349,000, up 3.7 percent from the previous year, the DGBAS said.

Based on this, the tax-deductible allowance for basic living expenses per person for this year’s income tax should be about NT$209,000, up NT$7,000 from NT$202,000 last year, the statistics agency said.

Photo: Clare Cheng, Taipei Times

Under the Taxpayers’ Rights Protection Law (納稅者權利保護法), the government is prohibited from taxing the amount people need to buy daily necessities, which is set at 60 percent of the previous year’s average per capita disposable income.

The exact amount of the adjusted tax allowance for basic living expenses will be officially announced at the end of this year, the Ministry of Finance said.

If the allowance for basic living expenses exceeds the personal allowance made up of the flat-rate deduction and special deductions, the difference can be deducted from gross income in the tax system.

This allowance is generally used by households with children, as for single people and couples without dependents, the basic allowance and standard deduction are generally more favorable, totaling NT$216,000 per person for the 2023 tax year.

However, the allowance per dependent was NT$92,000 in most cases last year, while the allowance for basic living expenses can be claimed on the tax return for any person, including dependents.

At the same time, the gap in disposable income between the top and bottom 20 percent of earners in Taiwan is at its smallest since 2019, according to the Family Income and Expenditure Survey.

The average disposable income per household was NT$1.137 million last year, 2.5 percent higher than in 2022, and the average disposable income per capita was NT$407,000, 4 percent higher than the previous year, the survey showed.

Average disposable income per household rose 2.6 percent from 2022 to NT$2.302 million for the top 20 percent of earners, while it rose 3 percent to NT$376,000 for the bottom 20 percent, it said.

This means that the income of the top 20 percent was 6.12 times higher than that of the bottom 20 percent, lower than 6.15 in 2022 and the lowest since 6.1 in 2019, according to the DGBAS.

In addition, it was the first time since 2017 that the rate fell compared to the previous year.