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Cabinet sends budget law to legislature

The Executive Yuan yesterday approved draft amendments to the Law Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法), which would make local governments enjoy more equal financial duties and responsibilities.

The draft will proceed to the Legislative Yuan for further review and final approval.

Cabinet Spokesman Chuang Suo-hang (莊碩漢) quoted Premier Yu Shyi-kun as saying yesterday that the Cabinet is happy to complete the proposed amendments as promised three months after the Legislative Yuan approved overturning the draft amendments proposed by the KMT during the previous legislative session.

"We hope that the new draft amendments would help decentralize both money and power, replace the current allocation system of fixed percentages with a distribution formula, increase the tax revenues of local governments and maintain or increase the amount of local governments' tax-redistribution fund," Chuang said.

To make the local self-governance system more complete, Chuang said, the Cabinet would propose a draft decree designed to better the relationship between the central and local governments by the end of July.

"Local governance is not only the foundation of a democracy but also a trend in the future," Chuang said. "The concept is that the central government doesn't intervene when local governments are capable of taking things in their own hands."

Under the draft amendments to the Law Governing the Allocation of Government Revenues and Expenditures, the tax-redistribution fund would increase NT$62.8 billion from NT$165.9 billion to NT$228.7 billion and the ordinary subsidy fund would decrease NT$31 billion from NT$105.5 billion to NT$74.5 billion.

Currently, the tax-redistribution fund comes from business, income and commodity taxes, while the ordinary subsidy fund comes from 10 percent each from the income and commodity taxes.

The funding then is apportioned by the central government directly to townships, counties and cities, and the special municipalities of Taipei and Kaohsiung in the amounts of 12 percent, 39 percent and 43 percent, respectively. The remaining 6 percent is retained by the central government as an emergency reserve.

Under the draft, the tax-redistribution fund would come from business and alcohol and tobacco taxes, while the sources and percentage of the ordinary subsidy fund would remain the same.

The funding would then be appropriated by the central government to local governments based on a distribution formula.

In the case of the tax-redistribution fund, 90 percent of the fund would go to special municipalities, counties and cities based on their financial ability and efforts to raise funds on their own.

Six percent would be used to offset special municipalities, counties and cities receiving less of the fund than they do now.

The remaining 4 percent would be used to tune up local governments lacking funds for disaster recovery and the central government receiving less of the fund than expected.

The ordinary subsidy fund would be distributed to local governments only for the purposes of education, social welfare, and the construction of infrastructure based on criteria such as local government's size, population and financial ability.

The allocation formula of the tax redistribution fund appropriated to townships, cities, and villages would be subject to the county governments.

To ensure the funds are used appropriately, the central government could hold, cut or add the funding based on the performance of local governments.

In addition to the two fundings, local governments would receive nearly NT$40 billion more in tax revenues as the central government plans to allow special municipalities to keep the same percentage (60 percent) of the national tax of inheritance and gift tax as that retained by townships, cities and villages.

Currently, special municipalities can keep 50 percent of the tax, while townships, cities and villages can retain 80 percent.

Counties and cities would also keep all of the land value incremental tax.

Currently, counties and cities are required to be levied 20 percent of the tax.
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