Is Taiwan intent on ending its international tax competitiveness?

An outmoded mindset

All such benefits would be net gains arising from increased efficiency that would lessen the burden on the environment because of more prudent use of natural and human resources. This is because higher prices for previously subsidized goods or services would encourage households and businesses to choose more economically. When governments fix artificially low prices, distortions are shifted to other sectors of the economy. Removal of subsidies on electricity or gasoline will benefit the environment by inducing conservation. Consumers will choose more sensible usage given their budgetary constraints.

The decision to rely upon higher taxes for deficit reduction indicates an outmoded mindset. Perhaps things might be different if political choices were made solely on the basis of equity and fairness or service to the community.

A superior approach to reducing public sector deficits is to rely upon restoring economic growth that will bring about revenue increases without imposing new taxes or increasing rates on existing levies. Globalization reveals that high economic growth is a matter of choice for policy makers.

Selecting a path of high growth requires that governments take the initiative to implement policies and support institutional arrangements that provide incentives for private entrepreneurs to undertake risks. In the end, only private sector actions can provide a sustainable source of job opportunities and additional wealth for a community. It is time to unleash more of these forces and allow greater scope for market transactions. In so doing, entrepreneurs can better discover what their fellow citizens want most on the basis of the prices they will be willing to pay.

In too many instances, raising taxes will place more money into a political culture tainted by mismanagement and corruption or a situation that might benefit more from less governmental presence in the economy. The choice of which path will bring better results should be clear.

Christopher Lingle is Global Strategist for eConoLytics.com and author of The Rise and Decline of the Asian Century. His E-mail address is: CLINGLE@eConoLytics.com.