Premier previews sweeping fiscal reform
By Ted Chen ,The China Post
February 22, 2014, 12:03 am TWN
TAIPEI, Taiwan -- Premier Jiang Yi-huah outlined during a Legislative Yuan session yesterday the government's plans to reassess portions of the nation's tax policies that are deemed outdated and no longer in line with pervading international trends, marking the beginning of sweeping fiscal reform of a staggering scale not seen in recent years.
A full outline of the initiative will be announced next week, said Jiang.
During his address, Jiang stated that the forthcoming reform is designed to remedy the nation's tax revenues shortfall, and stimulate job growth by incentivizing small- to medium-sized enterprise employers.
Most notably, the governing bodies are mulling over a move to combine the currently disparate consolidated income tax and individual income tax, reassessing the current business tax rate on financial services (金融營業稅).
Jiang stated that his plan for improving the nation's fiscal condition will include the reassessment of the business tax (營業稅) and income tax (所得稅). Considerations will also include the raising of special deduction amounts on salaries (特別薪資扣除額) and wages of disabled persons. In addition, terms of a number of pension and retirement schemes will be reassessed.
Jiang also announced plans to revitalize utilization of idle national assets such as state-held land, and seek to improve operating efficiency of state-run enterprises while pushing for privatization in public sector companies where appropriate.
The reform will also attempt to seek out new revenue sources, assess the feasibility of releasing shares of state-run enterprises to investors and create new opportunities in public construction projects in collaboration with the private sector.
According to Jiang, the forthcoming fiscal reform will also address the nation's mounting fiscal deficit, which has been rapidly expanding since the outbreak of the global financial crisis in 2008, and worsened by the devastation wrought by Typhoon Morakot the following year. In addition, maintaining the nation's debt utilization is of paramount importance, said Jiang.
Although rampant deterioration has been curbed by various government measures, the fiscal deficit remains a persistent problem for the nation, said Jiang.
The government is rapidly approaching its legally defined debt ceiling, as the budget last year continued to record year-on-year growth. Looking forward to 2015, a maximum of NT$307.2 billion in new loans may be raised before the debt ceiling is exceeded, Jiang said
Taiwan's fiscal deficit woes are reflected in the nation's discouraging tax-to-gross domestic product (GDP) ratio (租稅負擔率), with the indicator having fallen vastly below figures recorded by neighboring nations. According to the Ministry of Finance, Taiwan's tax-to-GDP ratio — a measure of a state's ability to collect taxes to fund public services and cover deficiencies — in the 1990s stood at 20 percent, and had been declining rapidly, dwindling to between 12 and 14 percent since 2000. The number tumbled to 12.8 percent in 2012.
According to reports, the Ministry of Finance is poised to establish a measure to raise the scope of tax collections, to be triggered when the national debt reaches 38.6 percent of GDP.
Meanwhile, political observers remarked that with the seven-in-one elections fast approaching, it is unlikely that the fiscal reform will call for significantly increased tax burdens on the populace.