TAIPEI - TAIWAN on Thursday approved a bill to cut corporate and personal income taxes as part of the government's efforts to tackle the recession, officials said.

Under the bill, the corporate income tax rate will be lowered to 20 per cent from the current 25 per cent while the island's three lowest personal income brackets will see taxes reduced by 1.0 per cent each, the finance ministry said.

The proposal will see the tax rates on the three lowest income categories reduced to 5.0, 12 and 20 per cent.

'The tax cuts will strengthen industrial competitiveness, to attract more investment and boost economic growth,' said a ministry statement.

The move is expected to benefit 73 per cent of individual tax payers, or 3.8 million households, the ministry said.

The bill, proposed by the cabinet last month, is expected to take effect in 2010 with the approval of the parliamentary finance committee, it said.

However, the cuts will lead to an estimated loss of 100 billion Taiwan dollars (S$4.44 billion) in annual tax revenue, officials said.

Taiwan plunged into recession as the economy contracted a record 8.36 per cent in the three months to December 2008 as the effects of the global economic meltdown took hold.

The economy is forecast to contract 2.97 per cent in 2009.

The government has unveiled an economic stimulus package worth some US$15 billion (S$22.5 billion) in business incentives, infrastructure projects and shopping vouchers.

It is also drafting a US$21 billionplan aimed at creating 150,000 new jobs in a bid to reduce unemployment to below 4.5 per cent this year. -- AFP