Hon Hai Group Chairman Terry Gou has questioned the rationale of a new accounting rule that treats profit-sharing bonuses for employees as a corporate expense, saying the measure could affect shareholder interests and eventually a company's share prices. Taiwan's Company Law used to stipulate that profit-sharing bonuses for employees should be counted as a distribution of earnings rather than as an expense. That led local companies to offer substantial bonuses instead of high salaries to attract talent, which allowed them to inflate the earnings reported in their financial statements and enhance their share value. Such measures have to be changed after corporate accounting regulations were revised in 2008. With the new rules demanding that profit-sharing bonuses be treated as an expense, corporate earnings have dwindled. But the new rule will help increase transparency in local companies' compensation systems, which will inspire corporate managers to design more reasonable and flexible compensation packages as incentives to attract or retain capable employees. Another rule change relates to stock bonuses. High-tech companies have generally offered stock bonuses to employees, but after the statute governing tax breaks for selected industries was invalidated at the end of last year, stock bonuses are no longer taxed based on the face value of the shares but on the shares' market prices. Moreover, recipients have to pay taxes on the shares when they receive them, regardless of whether they sell them or not. With the introdution of these new rules, cash is expected to account for a larger percentage of employee bonuses in the future, and companies will also have to diversify their compensation portfolios. In view of the situation, the government should design comparable taxation schemes to expand tax bases and prevent tax evasion. After the 2009 global financial meltdown, countries around the world have started to look into the rationality of compensation packages. We hope the government will follow suit to prevent improper tax scheme from sowing the seeds for a new stock bubble. 