Mon, Feb 18, 2019 - Page 6 News List

Combating injustice with fair taxes

By Feng Chien-san 馮建三

On Jan. 21, international development charity Oxfam published a report titled Public Good or Private Wealth? in which it proposed that governments around the world reduce inequality by taxing the rich more heavily. This is a very reasonable suggestion.

Former Taiwan Semiconductor Manufacturing Co chairman Morris Chang (張忠謀) once said that problems with Taiwan’s tax system, including tax cuts and exemptions for many businesses, made him feel that he paid too little tax.

This century, Taiwan’s total tax income has on average been less than 13 percent of GDP. That is lower than that of Hong Kong, which has no defense budget, and it is about 2 percentage points lower than it was during the 1990s.

This means that the government’s annual tax revenue over the past few years has been about NT$300 billion (US$9.72 billion) less than in the past. That shortfall is equal to about 40 percent of the entire special budget for the Forward-looking Infrastructure Development Program.

Seen from this angle, the fuss around the start of the year concerning the government’s supposed “fiscal surplus” is actually a matter of the government having left items out of the budget.

Taiwan has for nearly 20 years been one of the lowest-taxing countries in the world, making it necessary for the government to borrow on a large scale. The accumulated debt must be borne by future generations, which is a great generational injustice.

A responsible government should work out countermeasures long in advance. One of its tasks should be to make society understand that a fair taxation system does not hinder economic growth; it can provide the public with more adequate public services and better infrastructure, improve the environment and cut pollution.

At the same time, by redistributing resources more fairly, it can reduce people’s resentment so that they are more inclined to stay put in their jobs and perform them well, thus improving efficiency and raising labor productivity.

France is a case in point. France’s taxes add up to more than 46 percent of its GDP — among the highest of all countries belonging to the Organisation for Economic Co-operation and Development. Most of this tax revenue is spent on high-quality infrastructure and on providing free education, top-quality healthcare, childcare, care for the elderly and so on.

Before adjusting spending by means of taxation, French households in the top decile of household income — the top 10 percent — have an average income 22 times higher than the average in the bottom decile, but after progressive income tax, this ratio is reduced to six times.

At the same time, real household incomes in France have grown by 8 percent from 2008 to 2017, which is a much greater growth than seen in most wealthy countries.

Why, then, has there been such an outpour of anger from France’s gilets jaunes (“yellow vests”) over the past few months? It can hardly be because they are unhappy about these successes, so it must be because they worry that new changes to the system might erode or destroy those accomplishments.

For example, in October 2017, French President Emmanuel Macron partly abolished the wealth tax. Then, a few months ago, he said that his government would impose higher taxes on gasoline and diesel.

This should have been a viable way to cut air pollution and promote energy transformation, but French people could not help asking whether it was not very unfair to cut taxes on the rich while imposing fuel tax on everyone, given that such a tax is regressive in nature, as you pay the same tax no matter whether you are rich or poor.

This story has been viewed 2756 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top