Premier Wu Den-yih (吳敦義) instructed the Ministry of Finance to raise tax rates “when the time is ripe” by taking advantage of the economic recovery, Deputy Minister of Finance Chang Sheng-ford (張盛和) said yesterday after Wu paid an inspection visit to the ministry.
“It is not easy to raise tax rates right now, as it would evoke public anger,” Chang quoted Wu as saying.
The premier told the ministry to map out relevant complementary measures and engage in public discussion on the matter.
“The premier did not go into details,” Chang said when he was asked by reporters what the tax hikes would entail.
Chang said the premier brought up the concept of revitalizing assets, which would involve effective management of government-controlled assets such as public land to increase the nation’s revenues and gradually ease the nation’s financial burden.
The premier meanwhile said that a proposed energy tax bill should not be considered a tax hike, but rather a combination of different taxes, adding that the energy tax would be implemented only when non-tax measures and relevant supplementary policies are ready.
Because of the nation’s increasingly serious fiscal circumstances, the premier urged the ministry to examine tax cut proposals more strictly and set a deadline for preferential tax measures, Chang said.
The government implemented several tax cuts as part of its stimulus measures last year in an attempt to help the local economy recover. As the nation is moving out of the economic recession, the government has begun to withdraw these measures, Chnag added.
The premier told the ministry that fiscal discipline presented a problem not only to the central government, but to local authorities as well. He urged the ministry to redouble efforts to relax tax regulations and simplify tax declaration formalities, the deputy minister said.
Standard & Poor’s Ratings Services cut its outlook on Taiwan’s “AA-” long-term debt rating from “stable” to “negative” in April, citing the nation’s poor fiscal situation.
In its latest report, issued on Thursday, Standard & Poor’s Ratings Services said the nation’s net debt would reach 43.8 percent of GDP this year, up from 36.2 percent last year and higher than the AA-rated peer median of 11 percent.
The figure will continue rising to 45.7 percent next year and 46.3 percent in 2011, higher than the AA-rated peer median of 15.2 percent and 19.9 percent for each year, the report entitled “Asian Sovereigns To Remain In Debt Markets” showed.
Government deficit would account for 5.1 percent of GDP this year, up from 1.4 percent last year, the report said, adding that the number could drop to 3.5 percent next year and 3.1 percent in 2011.
ADDITIONAL REPORTING BY KEVIN CHEN
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