Inequality rules when allocating tax funds

By Chiu Li-li 邱莉莉  / 

Fri, Aug 17, 2007 - Page 8

Taipei County's elevation to special municipality status has created further controversy in the financial relationships between the central and local governments. To appease those bureaucrats in Taipei and Kaohsiung who will now have to share their special municipality funding with Taipei County, the Cabinet has resolved to provide a special subsidy to the two cities, giving NT$15.5 billion (US$467.5 million) to Taipei and NT$10 billion to Kaohsiung.

To keep the three special municipalities happy, the Cabinet has had to come up with another NT$25.5 billion.

Allotting more funds to one local government means taking funds from somewhere else.

The leaders of the other 22 counties and cities, who originally did not think this debate over funding had anything to do with them, have finally realized what is going on. Now they want to know whether they will be getting less as a result.

According to the Cabinet's distribution plan, the NT$25.5 billion will come from the general subsidies to city and county governments, and other sources. Of this, NT$11.7 billion would have been allotted to Taipei County before it was upgraded. But this means the central government must still come up with NT$13.8 billion.

But the central government has enough trouble keeping its own finances afloat, so aren't these alternative "sources of funding" a bit fanciful? Isn't this an indirect way of saying that money will have to come from the other counties and municipalities?

By law, the special municipalities share 43 percent of the centrally allocated tax revenues. Under the Cabinet's plan to provide additional subsidies, the three municipalities will get a greater ratio than they should. Otherwise, the NT$11.7 billion in funding that Taipei County would have received as a "normal" municipality should be given to the other 22 counties and cities.

Now regular municipalities may be forced to bail the central government and special municipalities out of their financial problems. This is nothing but heaping more abuse on the already weak local governments.

The special municipalities are more visible in the media, have stronger political influence, more vocal leaders and greater power to defend their interests.

The other counties and cities are much weaker. They have to accept what they are dealt. Although the passage of the General Local Tax Statute (地方稅法通則) in 2002 allowed cash-strapped local governments to raise taxes, only Taoyuan, Miaoli, Kaohsiung and Yunlin counties and Tainan City have done so.

The special municipalities have not been forced to cut spending or support their expenditures with their own taxes. They continue to be completely dependent on subsidies.

Residents of normal municipalities have it tough. They pay taxes just like people in the special municipalities, but they have to put up with inferior facilities. Sometimes they even have to pay additional local taxes.

I hope that the Cabinet will be fair as it tries to resolve the dispute with the special municipalities and not damage the interests of the normal municipalities.

Chiu Li-li is a Tainan City councilor.

Translated by Marc s