2016 Index of Economic Freedom

Taiwan

overall score74.7
world rank14
Rule of Law

Property Rights70.0

Freedom From Corruption61.0

Limited Government

Government Spending88.7

Fiscal Freedom76.1

Regulatory Efficiency

Business Freedom93.2

Labor Freedom53.8

Monetary Freedom83.2

Open Markets

Trade Freedom86.4

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 23.4 million
  • GDP (PPP):
    • $1.1 trillion
    • 3.7% growth
    • 4.5% 5-year compound annual growth
    • $45,854 per capita
  • Unemployment:
    • 4.0%
  • Inflation (CPI):
    • 1.2%
  • FDI Inflow:
    • $2.8 billion
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Small and medium-size enterprises have been the backbone of Taiwan’s economic dynamism. The commercial code is well developed, and open-market policies continue to facilitate the free flow of goods and capital. A sound legal framework provides strong protection of property rights and upholds the rule of law.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 74.7 (down 0.4 point)
  • Economic Freedom Status: Mostly Free
  • Global Ranking: 14th
  • Regional Ranking: 5th in the Asia–Pacific Region
  • Notable Successes: Trade Freedom, Business Freedom, and Property Rights
  • Concerns: Labor Freedom and Management of Public Finance
  • Overall Score Change Since 2012: +2.8

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Background

Taiwan is a dynamic multi-party democracy, and its economy is one of the richest in Asia. President Ma Ying-jeou has relaxed cross-Strait barriers with the People’s Republic of China and negotiated a multi-stage formal economic agreement with Beijing, but these closer relations could be challenged after the 2016 presidential election. Taiwan is excluded from membership in the United Nations, other international organizations, and a variety of free trade arrangements as part of Beijing’s efforts to pressure it into unification. Although internal opposition to engaging with China is considerable because of fears that sovereignty will be lost, recent economic arrangements now bind the island closer to the PRC.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 61.0 Create a Graph using this measurement

Although corruption is much less pervasive now, politics and big business remain closely intertwined. For example, a large Taiwanese food company accused of selling tainted cooking oil allegedly avoided strict safety inspections due to its close connections with politicians. The judiciary is independent, and the court system is free of political interference. Property rights are generally protected, and the judiciary enforces contracts well.

Limited GovernmentView Methodology

The top personal income tax rate has been increased to 45 percent, and the top corporate tax rate is 17 percent. Other taxes include a value-added tax and an interest tax. The overall tax burden equals 8.7 percent of total domestic income. Government spending amounts to 19.4 percent of GDP. The budget has been in deficit, but public debt has been kept to below 40 percent of total domestic product.

Regulatory EfficiencyView Methodology

With no minimum capital required, it takes only three procedures to start a company. Simplification of business registration procedures has continued in recent years. Bankruptcy proceedings are fairly easy and straightforward. The labor market lacks flexibility. Prices are largely determined by the market, but the government does influence some prices and controls prices for electricity and pharmaceutical products.

Open MarketsView Methodology

Taiwan’s average tariff rate is 1.8 percent. Many agricultural imports face additional barriers. Foreign investment levels in some sectors of the economy, including telecommunications and airlines, are capped. The financial sector offers a wide range of products and services but remains fragmented and susceptible to state interference. Renminbi-denominated financial services have been growing steadily since 2013.

Country's Score Over Time

Bar Graph of Taiwan Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Taiwan to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Hong Kong88.6-1.0
2Singapore87.8-1.6
3New Zealand81.6-0.5
4Australia80.3-1.1
5Taiwan74.7-0.4
6Japan73.1-0.2
7South Korea71.70.2
8Malaysia 71.50.7
9Macau70.1-0.2
10Brunei Darussalam67.3-1.6
11Thailand 63.91.5
12Kazakhstan63.60.3
13Samoa63.51.6
14Philippines63.10.9
15Vanuatu60.8-0.3
16Azerbaijan60.2-0.8
17Sri Lanka59.91.3
18Tonga59.60.3
19Kyrgyz Republic 59.6-1.7
20Bhutan59.52.1
21Indonesia59.41.3
22Mongolia59.40.2
23Fiji58.8-0.2
24Cambodia57.90.4
25India56.21.6
26Pakistan 55.90.3
27Vietnam542.3
28Maldives53.90.5
29Bangladesh 53.3-0.6
30Papua New Guinea53.20.1
31China52-0.7
32Micronesia51.82.2
33Tajikistan51.3-1.4
34Nepal50.9-0.4
35Laos49.8-1.6
36Burma48.71.8
37Solomon Islands470.0
38Kiribati46.2-0.2
39Uzbekistan46-1.0
40Timor-Leste45.80.3
41Turkmenistan41.90.5
42North Korea2.31.0
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