The Ways in which The Law Affects Business in Taiwan

 The Ways in which The Law Affects Business in Taiwan

Intro

Going ahead with a business venture is a great career choice for many entrepreneurs, but getting a business up and running and maintaining it smoothly needs more than just efficiency and management skills. And the law is one of the prominent factors that can either help the business grow or ruin it eventually. There are several ways that legal factors affect businesses. From business contracts, getting licenses, and hiring employees, or even managing the taxation. I will highlight some essential legal issues that affect businesses in Taiwan. To operate businesses efficiently, we must know what is expected and what is prohibited. It is also important to know that the government can change the rules and regulations concerning businesses from time to time. Therefore, to be on the good side of the law, ensure that you are up to date with your government laws.

Major Sources of The Law of Taiwan

The sources of laws of Taiwan are majorly from the constitution, common laws, specific laws, and executive orders. They are all based on the Constitution of Taiwan. The Central Regulations and Standards Law as the general rule of its formulation. The Constitution is the fundamental law of Taiwan. With the highest effect, any other laws or orders in Taiwan can not contradict it. The Laws passed by the Legislative organ and signed by the President of Taiwan may be approved to become orders or regulations for implementation.

Management

Governments impose business rules and regulations to ensure that all businesses are run in line with codes of ethics, good health, and the safety of the consumers. In Taiwan, according to the Food Safety and Sanitation Act announced in 2019, the Ministry of Health and Welfare in Taiwan trying to enact to govern food sanitation, safety, and quality, and protect the health of citizens. Food businesses must have a food safety monitoring plan to ensure food sanitation, safety and to test their raw materials, semi-products, or end products on their own. For example, foods or food additives with any materials that are harmful to human health, pesticide or veterinary drugs residue exceeding the permissible tolerance, and expired can not be manufactured, processed, prepared, packaged, transported, stored, sold, imported, and exported.

The major impact of the Food Safety and Sanitation Act on the food industry is they have to ensure their products can not be harmful to human health. That means they must cost more on maintaining the quality of their products. From another perspective, the law protects the public from being harmed and also protect good business owners from failure when their competitors are snatching their market shares by lowering their cost to provide bad foods. However, due to the extra procedures and processes, the prices will rise accordingly. 

Finance

In Taiwan, according to the Securities and Exchange Act announced in 2021, during the public offering, issuing, or trading of securities, no misrepresentations and frauds are allowed. Therefore, misleading anyone to trade securities is prohibited. In addition, the financial reports or any other documents disclosed by an issuer cannot contain any misrepresentations. The major purpose of the Securities and Exchange Act is to support economic development and to protect investors.

The major impact of the Securities and Exchange Act in Taiwan is that misrepresentations and frauds are both reduced, financial reports or any other documents disclosed by an issuer are more reliable, and the whole investing is heading to a more stable future. However, many new startups are struggling with their reports and adventures since they need funds to grow their risky new ideas. 

Consumer Protection

If you want to run businesses in Taiwan, you better understand the Consumer Protection Act. The Consumer Protection Act is enacted to protect the interests, facilitate safety, and improve the quality of life of the consumers. Merchants have to provide a period, within 30 days, for consumers to review all clauses and details in contracts before actually completing trades. The review terms cannot be canceled by other terms to mislead consumers.

The major impact of the Consumer Protection Act is that now consumers can regret legally and force the merchants to prepare for the possible returns. The spirit of this law is to avoid consumers unexpectedly or misleadingly purchasing something they don't need or making them regret. It aims to provide a fair trading environment. However, it also increased the cost of processing the returns for merchants. But, if you think positively, it is also a great chance to provide higher quality products and build trust and loyalty. If your customers are reducing their returns and know you are a trustworthy company that is always happy to do better, they are more likely to be loyal.

Property Protection

According to the Trademark Act in Taiwan, using a trademark that is identical or similar to the registered trademark in relation to goods or services without the permission of the proprietor is held as an infringement of the right of the trademark. The purpose of this Act is to enact to protect the rights of trademark, certification mark, collective membership mark, collective trademark, and the interests of consumers and to maintain fair competition of the industry and commerce.  

Like many other countries, trademarks regulations are also governed by the law. To build empires like Starbucks or McDonald's, are not three-day work or just drawing a mark and pasting them on the wall of all the stores. It is also a differentiation between quality and special cultures. The act provides incentives for trademark owners to provide higher-quality products and services. 

Marketing

Many advertising providers often use early-bird limited discounts as incentives to attract customers. According to Taiwan’s Fair Trading Law, overly lowering the price that intends to restrict competition is prohibited. If a merchant applies an excessive price-cutting competition strategy and it is very difficult for other competitors to provide the same price, this strategy may violate the Fair Trading Law. In addition, overly exaggerated statements that affect consumers' decisions or mislead consumers are also prohibited. For example, some products are claimed to be “first in the country” or “first in the industry”, but it is not allowed if it is not true.

I think the spirit of the Fair Trading Law is to provide consumers with an informative environment while they are making any purchasing decisions. However, even though consumers can get enough correct information, their decisions are not always rational and make 100% wise choices. For example, what if you are browsing Amazon.com searching for a tablet, the payment option is usually only cash, but now credit card is allowed? None-cash payments allow you to get things first and pay later. These payment methods induce us to spend more, even though merchants do not advertise them.

The Taxes

Taxation policy is one of the government policies that affect businesses directly because it is one of the big payables of all businesses and affects their revenues. According to The Specific Goods and Services Tax Act, as known as the Luxury Tax, the sale, manufacture, and import the specific goods within the territory of Taiwan have to follow the rules of this act. The specific goods are any unit of a building and the land associated with the unit that has been held for less than 2 years, any car with the value of over NT$3,000,000, any yacht with a full length of over 30.48 meters, airplanes, helicopters, furniture that been sold over NT$500,000. That means if you are selling these goods in Taiwan, you will be charged a lot of money only because they are expensive. The major purpose of this act is first to lower the prices of land and houses since the housing prices are extremely high. However, it did not work well. The housing prices are still higher than we think they should be.

Labor

Business laws affect employers-to-employees relationships and it is mandatory for employers to follow government regulations regarding the way they treat their employees and their hiring mechanism. If you trying to start up a company and hire workers in Taiwan to join your venture, the Labor Contract Law is the rule you have to know. For example, the minimum wage and the insurance are employers' obligations and employers should not treat workers differently due to their genders. In addition, workers cannot be forced to work exceed eight hours per day and forty hours per week. 

I think the law is trying to balance the rights of both employers and workers since it regulated both of them to perform their duties. However, the minimum wage is not an effective way to do it. Wages are the prices that depend on the demand and supply of labor. Therefore, the best way is to increase the demand for labor, according to the Demand and Supply Model.

Reference

ACT Governing Food Safety and Sanitation - Article Content - Laws & Regulations Database of the Republic of China. (n.d.). Retrieved November 13, 2021, from https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=L0040001. 

Consumer protection act - article content - laws & regulations database of the Republic of China. (n.d.). Retrieved November 13, 2021, from https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=J0170001. 

Williams, B. (2017, February 7). How does the law affect businesses? YourStory.com. Retrieved November 14, 2021, from https://yourstory.com/mystory/6d7c3b1641-how-does-the-law-affect-businesses-/amp.