The meeting between the Ministry of Finance and local governments yesterday failed to hammer out a consensus over how to allocate the tax redistribution fund for fiscal year 2003.
The ministry indicated it would go ahead and submit its own formula to the Cabinet for approval, while local governments vowed to seek a remedy through legislation.
At issue is about NT$150 billion in tax funds, which the Cabinet must divide among the two "special municipalities" of Taipei and Kaohsiung, as well as 23 other counties and cities.
The ministry has proposed lowering the ratio of funds for Taipei and Kaohsiung from 43 percent to 36.2 percent in a bid to balance development between the two cities and other areas.
The proposal would increase the share for the other 23 counties and cities to 39 percent of the fund, with the Cabinet keeping the remaining sum for emergency purposes.
The formula has drawn strong protests from Taipei Mayor Ma Ying-jeou (馬英九) and his Kaohsiung counterpart Frank Hsieh (謝長廷), who argue that their constituencies contribute the lion's share of tax revenue and therefore deserve more funding in return.
But Minister of Finance Yen Ching-chang (顏慶章) said the room for adjustment is limited.
"The forum provided an avenue for all sides to express their views about the issue," Yen told reporters after the meeting. "We will consult more experts over the proposed figures but changes, if any, will be few."
Under the ministry's plan, Taipei and Kaohsiung cities can expect a cut of NT$10.6 billion from the redistribution fund, while the other local governments will enjoy a modest increase of NT$10.5 billion.
As special municipalities, the two cities fall under the direct supervision of the Cabinet and have long claimed a large portion of government funds.
However, with the virtual abolishment of the provincial government, this special treatment is now called into question as the Cabinet now also directly oversees the other 23 counties and cities.
Ma warned the Cabinet to expect a "tax war" every year unless it agrees to enlarge the fund by amending tax rules -- and it allows the local governments to keep a greater share of the assorted revenues.
To that end, he has advocated the equal division of business taxes between the local and central governments and increasing the share of income and commodity taxes that local governments may keep from 10 percent to 30 percent.
"In this way the Cabinet would, in effect, double the redistribution fund to NT$300 billion and grant local governments more financial autonomy," Ma said. He maintained that nothing short of expanding the pie would calm the tax row.
Echoing the same theme, Kaohsiung Deputy Mayor Lin Yung-chien (林永堅) urged the Cabinet to increase construction grants and other forms of aid.
"We hope to not only gain a larger share of the redistribution fund, but to also be included on the list of those who get some of the pudding," Lin said, referring to subsidy funds for which Kaohsiung and Taipei are excluded from applying for.
Hsieh, chairman for the ruling DPP, chose not to attend the meeting, saying he preferred to discuss the matter during the Cabinet council and other forums where there is less media scrutiny.
He said he would back Ma's proposal if it made more sense than the one put forward by the finance ministry.
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