Can you imagine a future where Taiwan’s citizens are divided into five classes? This terrible nightmare could soon happen, as the government is proposing amendments to the Act Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法) and the Public Debt Act (公共債務法) to be able to handle the creation of four new special municipalities.
In the future, the “first class” status of Taipei residents will remain unchanged. Residents in the other special municipalities will make up the “second class.” The “third class” will be made up of those living in the heavily commercial and industrial counties, while the “fourth class” will consist of those living in regions protected by a special development act, such as the outlying islands and eastern Taiwan.
The “fifth and most unfortunate class” will be those living in the agricultural counties and cities in central and southern Taiwan, unprotected by special development acts and without the redistribution of funds from the central government. They will only be able to survive on subsidies from the central government. This situation is obviously contradictory to the original intent of the allocation act, which was to eliminate the disparity between rich and poor counties and cities.
To let the new version of the allocation act pass, the Ministry of Finance (MOF) came up with a calculation that makes everyone a winner. A closer look at this calculation, however, quickly reveals a few problems.
First, this new version contains much less than an earlier agreement reached by cities and counties to deal with the upgrading of Taipei County to special municipality status. Second, the formula may be more scientific than in the past, but each city and county seems to have its own view of how that formula was arrived at. For example, there seems to be no common understanding between cities and counties on whether the agricultural and livestock farming industry should be included, or if industrial productivity is the key.
Third, it is unavoidable that some cities and counties will lose out in the allocation of revenues, and this could easily lead to intense fighting in the legislature. In addition, the foundation for the calculation in the new version of the allocation act does not consider the issue of financial scope. The cities that will possibly be upgraded into special municipalities will require more staff and more expenditure, but this is not considered in the new calculation.
By using the current financial scope as the basis for the calculation, the existing special municipalities will receive more, and no consideration is given to whether the basic needs of schools, hospitals and other public facilities in other counties and cities are met. Instead, since their needs are not met, the government thinks they require less money, which is the exact opposite of the actual situation.
This situation could be compared to a family where the elder brother is given money to purchase a motorcycle to impress his girlfriend, while his brother who is still young doesn’t need much money. As a result, when the younger brother needs money for school books and food, there isn’t any because that money has been given to his big brother to buy a motorcycle.
The MOF has obviously not considered that the financial scope of the cities and counties that will be elevated to special municipality status in the future will not remain the same, but will increase. Why else should they be upgraded in the first place?
The Cabinet’s plan for dealing with the problems that may arise from this situation is also absurd. It plans to modify the Public Debt Act by relaxing restrictions on debt limits, so that cities and counties can solve their budget deficits by issuing debt. As a matter of fact, the Ministry of Audit’s estimates show that Taiwan’s hidden debt has reached NT$15 trillion (US$476 billion), exceeding Taiwan’s annual GNP, even more than the debt of what the international media calls the “PIGS” countries — Portugal, Italy, Greece and Spain.
As everyone is worried about the rapid increase in the government’s budget deficit, the Cabinet wants to resolve the financial problem of cities and counties resulting from a shortage of central budget allocations by unconditionally lifting debt limits. This is tantamount to issuing a reckless amount of cash cards and leaving the debt to the next generation; an act completely devoid of any sense of generational justice.
Coming up with such measures to accompany the creation of four new special municipalities is clear evidence that Minister of Finance Lee Sush-der (李述德) never watches TV. If he did, he would have noticed the credit card commercial that ends with the phrase: “Manage your money carefully, good credit is the best policy.”
Lee Tuo-tzu is a research co-ordinator at the Taiwan Brain Trust.
TRANSLATED BY WU TAIJING
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