During the 2008 presidential election campaign, President Ma Ying-jeou (馬英九) made his “6-3-3” pledge, in which he promised annual GDP growth of 6 percent, annual per capita income of US$30,000 and an unemployment rate of less than 3 percent within his first term in office if elected.
This year, exports have fallen for eight consecutive months.
With less than 100 days to go until January’s presidential election — and with the nation’s economic woes set to continue — Minister of Finance Chang Sheng-ford (張盛和), Chinese Nationalist Party (KMT) Legislator Lai Shyh-bao (賴士葆) and others are attempting to rescue the situation.
The group of politicians has been trumpeting a faux panacea of “tax cuts to rescue the economy,” while, in reality, the KMT is scheming to use economic bribery as a vote-buying tactic ahead of the election.
In the past two decades, a reduced tax rate for corporations and the rich has resulted in a national land tax burden rate of only 12 percent: Not even half the figure of advanced economies, which average 26.1 percent, and on par with the bottom five nations globally.
Cyrus Chu (朱敬一), a research fellow at the Institute of Economics at Academia Sinica, has strongly criticized advocates of tax cuts for being “at worst thieves, at best malign individuals.”
Many of the corporations that are being protected through low tax rates are in fact hopeless and uncompetitive enterprises. They continually call on the government to further reduce taxes, but how much lower can they go?
The tax-paying classes shoulder three-quarters of the national tax burden: This is even more skewed in favor of corporations than it is in the US.
The disparity between rich and poor in Taiwan is getting wider, as young people — the “time bomb generation” — lack opportunities to improve their prospects. Should members of the Legislative Yuan’s Finance Committee not take responsibility for this situation? Especially the so-called veteran committee members, who have sat on the committee for successive terms.
The only way to save the economy is through green tax reductions. Ninety-nine percent of the nation’s energy supply relies on imports. Oil and electricity prices are the lowest in Asia and yet ordinary citizens are continually subsidizing big businesses.
Western European nations implemented energy taxes as early as the 20th century. In recent years, a set of green taxation tools — often dubbed “carbon taxes” — have been introduced by governments to reduce greenhouse gas emissions. For every tax on pollution received from businesses, the income tax of citizens is reduced by an equivalent amount to adhere to the principal of tax neutrality — since environmental protection should not result in increased taxation or be used as an excuse to increase the tax burden on the public.
Using energy taxation to substitute a portion of the income tax is equivalent to users of the planet picking up the tab, then asking polluting companies to pay the tax on their behalf. The more savings are made, the more money can be earned. Since there is a significant incentive to protect the environment, it is no longer just down to individual prudence and virtuousness.
At the same time, manufacturers that use energy-efficient means of production and reduce their energy consumption would pay less tax. Through the market structure of green taxation, achievements have been made in terms of energy savings, carbon reductions, transformation of the industrial sector and social justice.
The Ministry of Finance’s aim of stimulating and rejuvenating the economy is not wrong.
However, in seeking to rush through the legislature its three-pronged bill — which aims to promote research and innovation, the recruitment of talent and investment — and which has passed its third reading already, the ministry might be sacrificing the legislation’s efficiency.
In addition to the problems of fake foreign capital and speculative investment, as old cars are replaced by new ones — and with each car manufacturer already planning price reductions for the new models — reducing excise duties would simply increase profits for companies belonging to Ma’s cronies.
The government is tying itself to the outdated thinking of the railway locomotive industry by going down the road of encouraging polluting industries and, in doing so, is going against the spirit of the UN’s Green New Deal.
During an economic downturn, the government should be giving green industries a helping hand, widening green investments, establishing a green engineering foundation and taking the opportunity to carry out a structural reorganization of the industrial sector.
Once the global economy has recovered and energy prices have returned to stable levels, the cost structure and operating efficiency of domestic manufacturers would be thoroughly transformed.
Only by becoming more competitive would companies be able to grasp hold of key changing trends within their industries.
In January’s presidential and legislative elections, the newly awakened younger generations are likely to use their votes to remove corporatist legislators to clean out and remodel the legislature. This would be the first step in genuine tax reductions for ordinary Taiwanese.
Pan Han-shen is strategic officer of the Trees Party.
Translated by Edward Jones
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