Minister of Finance Lee Sush-der (李述德) said yesterday the government would press ahead with tax reform and expand borrowing this year to rein in the economic downturn and boost national wealth.
“It is not fair to brand me a prodigal minister who knows only how to raise debts and cut taxes for the rich,” Lee told a press conference on the ministry’s policy goals this year.
Lee said there was nothing wrong with borrowing as long as the government is able to pay back the debts and spend the money on meaningful construction projects.
“Some say it is irresponsible of the government to leave debts to future generations,” he said. “I say the practice is necessary to create happiness for future generations. The government needs loans to finance the proposed economic stimulus and carry out construction projects.”
The minister cited as an example the NT$85.65 billion (US$2.58 billion) consumer voucher plan, as well as the NT$500 billion spending program to stimulate the economy.
To help raise funds, the ministry will issue NT$110 billion in bonds and NT$60 billion in treasury bills in the first quarter.
Lee said the ministry was also assessing the possibility of borrowing money from abroad, but had not yet reached a conclusion on this plan.
“The ministry is seeking to raise funds at the lowest possible cost,” Lee said. “It also has to take into consideration if such borrowing is appropriate.”
The nation’s debts currently stand at around NT$4 trillion, or 32 percent of GNP. The public debt law mandates a ceiling of 40 percent, the minister said.
While governments around the world are engaged in aggressive borrowing to rescue troubled companies, Lee said the Taiwanese government has yet to spend a penny to bail out any firm.
He said that state-run banks were conducting research on potential consolidation plans as they are aware of the need to stay competitive or risk being forced out of the market.
“The authorities will abide by the principles of fairness and legitimacy when weighing potential options,” Lee said. “Nothing has been finalized yet.”
Lee dismissed criticism that the tax reform committee had accomplished little except to lower taxes to placate the rich.
He said the committee had reached a consensus on raising the amount of deductions for more than 3 million people and cut the corporate income tax levy to 20 percent from 25 percent now.
“Small firms will also benefit from the tax reform once the legislature approves the rate cut,” the minister said, adding that the committee would carry on its mission of overhauling the nation’s taxation system.
Lee said his ministry would continue to encourage banks, especially state-run lenders, to extend loans to cash-strapped companies but would not pressure them to do so.