There is one financial item in the US that does not exist in Taiwan called the “community contribution rate.” For example, if Bank of Taiwan’s Muzha branch had NT$1 billion (US$31.62 million) in savings deposits and released that money through loans for economic activities in the Muzha area, that would meet requirements.
However, if it only lent NT$400 million to the area and used the remaining NT$600 million for loans to other areas, that would not meet requirements and would affect the bank’s business operations and applications for new branch offices.
The theoretical foundation for this idea is the concept of corporate responsibility: If businesses operate in an area and thus obtain their funds there, they, in return, have a responsibility to contribute to the local community.
On Wednesday last week, US president-elect Donald Trump gave his first news conference since winning election in November last year. Trump announced that US businesses that set up factories in other nations would have to pay a high border tax, which is an idea based on the concept of corporate responsibility.
It is something that Taiwan should give some serious thought.
A company is able to grow in size and prosper thanks to the contributions made by all taxpayers, as well as education, construction, law and order, and consumption; it is not something that can be accomplished by the smarts and talent of a single person.
This is why successful businesses should pay back to society from their profits instead of moving them somewhere else. Some even move their production abroad and export their products to Taiwan, thus hurting employment and weakening wealth creation in their home country.
Using a pretty metaphor, this is called “globalization,” but the result is rising unemployment and falling salaries, and in the longer term, falling consumption and investment and a weaker nation. This phenomenon occurred at an early stage in Taiwan and then spread to Japan, the US and Europe.
It was no accident that Trump won the US election, but rather the unavoidable result of what could be called “transitional economic justice”: A backlash from low and middle-class voters who feel that business owners have been promoting globalization over the past dozen years, moving their production bases to low-cost countries and enjoying high profits while sacrificing domestic living standards, creating an unfair economy in which business owners own more than half the nation’s wealth.
Trump has grasped this social context and a border tax is a way to force businesses to fulfill their corporate responsibilities. If companies do not move their business back to the US, they should give back to society by returning some of the “inappropriate” profits they make overseas in the form of taxes in what could be seen as a form of transitional economic justice implemented through a fair tax system.
Trump’s comment was positively received, because this makes sense, and Ford and the air-conditioning and refrigeration manufacturer Carrier have changed their Mexican investment plans, while Amazon.com has announced that it will add 100,000 people to its work force.
Taiwan has also had its own Trump: In 1996, then-president Lee Teng-hui (李登輝) understood that businesses moving their production bases to China at the drop of a hat would affect Taiwan’s economy and workers, which was the reason he proposed the “no haste, be patient” policy.
Unfortunately, the policy did not last long, and the result has been 16 lost years and a depressed economy.
The long-term hardship that workers and young people have experienced as a result has been much worse than it has been for their US counterparts. Fortunately, the Sunflower movement woke people up at the right moment, which created the opportunity for last year’s change of government.
Just like the US, Taiwan needs a Trump to push through transitional economic justice. The amendment to the Labor Standards Act (勞動基準法) that introduced a five-day workweek has been passed, but that will not make the cake bigger.
At its most fundamental level, Taiwan’s economic problem is that businesses move their investment capital overseas — read China — sacrificing the domestic economy while feeding China and China-based Taiwanese businesspeople at the cost of starving workers in Taiwan.
Taiwan needs legislation regulating such transitional economic justice in a way similar to how Trump’s border tax would work. If Trump and the US can do it, so can Taiwan.
Huang Tien-lin is a former Presidential Office adviser and a former president and chairman of First Commercial Bank.
Translated by Perry Svensson
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