Priorities this year will be tax reform and finances: MOF

Tax reforms and continued efforts to improve government finances will be the two main priorities of the government this year, Minister of Finance Ho Chih-chin (何志欽) said during a press conference yesterday.

"The scheduled expiration of the Statute for Upgrading Industries [促進產業升級條例] in 2009 will be a watershed." Ho said. "The ministry will push for a new tax framework that will take the government's financial burden and fairness for all taxpayers into account, while continuing to maintain the competitiveness of our industries."

"We will reach a preliminary conclusion by the end of January, but a formal presentation will have to wait until the end of the Lunar New Year holidays," he said.

The minister also said the ministry would keep tax rates low, while broadening the tax base and simplifying the tax administration and push for reforms such as the consolidation of profit-seeking enterprise income tax and consolidated income tax.

With increased tax revenues and strict budget control by the Directorate-General of Budget, Accounting and Statistics, the central government's balance sheet last year was expected to break even for the second year, the ministry said.

While only 97 percent of the NT$160 billion (US$4.9 billion) central government budget last year was used, higher tax revenues will exceed that amount, said a ministry official who declined to be identified.

"The effect of the minimal taxation regulation [最低稅負制] and higher-than-expected revenue from securities transaction tax contributed to the breaking even of government's budget," Ho said.

But Ho said the national budget, which includes that of the central government, local governments and some special budgets, was still in deficit.

The government will work to improve its financial health by decreasing the debt burden, he said.

The liability of the nation's public debt was evaluated at NT$5 trillion, deputy minister Liu Teng-cheng (劉燈城) said.

Taiwan's public debt accounted for 40.7 percent of its GDP and 226.1 percent of its tax income last year, Fitch Ratings estimates showed.

The focus of the press conference, however, was on the ministry's position on Taishin Financial Holding Co's (台新金控) aggressive move in offering Chang Hwa Commercial Bank (彰化銀行) shareholders 1:1.3 Taishin shares in order to complete the merger between the two institutions.

The ministry holds four seats on the Chang Hwa board, to Taishin Financial's eight.

The Chang Hwa Bank labor union recently intensified its opposition to the deal, saying the share swap ratio offered by Taishin Financial did not favor Chang Hwa. In a statement on Wednesday, the union urged the ministry to take a tougher stance on the offer.

Finance ministry officials were silent on the controversial merger.

"We will protect the interest of the government as well as that of other shareholders," Ho said, without elaborating.

Chang Hwa is scheduled to hold a special board meeting today to make its own proposal.