The Cabinet yesterday unveiled a NT$180.9 billion (US$5.6 billion) package of measures to lift the sagging economy, but said it had not yet calculated how much it would contribute to annual economic growth.
“Of course [the proposal] will be a boost to GDP, but we are still in the process of calculating [its contribution to growth],” Council for Economic Planning and Development Chairman Chen Tian-jy (陳添枝) said.
The economic package covers 41 measures and incentives to promote exports, consumption, employment, real estate, public infrastructure, private investment, financial markets, loans to small and medium enterprises, tax reforms and care for the disadvantaged.
Describing the proposal as a “comprehensive” package that will have a great impact on the nation’s economic fundamentals, Premier Liu Chao-shiuan (劉兆玄) told the Cabinet meeting that the plan would drive NT$1 trillion in investment and consumption by the end of next year.
The proposal was a long-awaited measure amid public frustration as the domestic economy faltered, with bilateral trade in July recording a deficit for the first time in two years and the stock market plunging 2,961 points, or 32.1 percent, since President Ma Ying-jeou (馬英九) took office in May.
Ma’s recent remarks in an interview published in a Mexican newspaper that his “6-3-3” campaign pledge was unlikely to be realized anytime soon, but that he hoped it could be achieved by 2016, or at the end of two terms in office, were widely seen as a factor that contributed to the stock market turmoil.
Ma’s “6-3-3” economic policy refers to his promise of an annual economic growth rate of 6 percent, an annual per capita income of US$30,000 and an unemployment rate of less than 3 percent per year.
The economic stimulus package, which was approved at the Cabinet meeting yesterday after several intensive meetings convened by Vice Premier Paul Chiu (邱正雄), contained few new measures.
“Some of the measures have been presented before, but we have added some new measures, blending them into a new action plan,” Liu said.
Chiu has been appointed by the premier to coordinate economic policies.
After the Cabinet officials’ meeting with Ma and Vice President Vincent Siew (蕭萬長) on Thursday night to discuss the controversial issue of slashing the stock exchange tax to revitalize the stock market, the measure was also included in the economic stimulus package yesterday.
The Executive Yuan will send its proposal to amend the Securities Transaction Tax Act (證券交易稅條例), with the tax rate being halved from 0.3 percent to 0.15 percent for half a year, to the legislature for review.
One main concern over the proposed tax cut is it could result in unequal taxation, favoring stock investors who are already exempted from paying taxes on their capital gains from trading in the stock market.
Liu argued, however, that lowering the securities transaction tax for half a year could help maintain a rudimentary momentum in the stock market and could have a greater impact on economic development in the long run.
Responding to concerns over possible loss of tax revenue as a result of the tax reduction, Minister of Finance Lee Sush-der (李述德) said that the measure could also lead to an increase in tax revenue as a lower stock transaction tax could encourage investors and raise trading volume.
The Chinese Nationalist Party (KMT) caucus threw its support behind the Cabinet’s decision to halve the transaction tax.
KMT caucus whip Lin Yi-shih (林益世) called the reduction “an unusual measure at an unusual time” and urged the opposition to refrain from criticizing the Cabinet.
INCOMPETENCE
The Democratic Progressive Party (DPP) caucus yesterday criticized the Cabinet, saying it was incompetent and repeated calls for a reshuffle.
Cheng Wen-tsang (鄭文燦), director of the DPP’s Department of Culture and Information, said that the stock market’s plunge yesterday was a reflection of the public’s lack of confidence in the Ma administration.
Saying that halving the tax for six months is only a temporary measure, Cheng said that the problem lies in investors’ lack of confidence.
The government should find out the cause of the economic downturn first, and then come up with effective measures to put it right, he said.
KMT Legislator Lee Hung-chun (李鴻鈞) was also critical of the Cabinet’s proposal, saying the Cabinet should explain how it planned to make up for the revenue shortfall after the tax cut.
Meanwhile, several labor groups staged a protest against the proposed tax cut outside the Executive Yuan yesterday morning.
“Cutting the stock transaction tax in half is the first step of the government’s plan to launch a large-scale tax reduction program that would favor the rich, and the result will be a decline in government spending on social welfare desperately needed by the poor,” said Pan Shin-jung (潘欣榮), a member of the Alliance for Public Education.
TAX REDUCTIONS
He was referring to the Cabinet’s plan to further reduce the rates of enterprise income taxes, inheritance taxes, gift taxes and commodity taxes.
Despite the Cabinet’s announcement late on Wednesday night that it would halve the securities transactions tax, the TAIEX shed 206.06 points, or 3.19 percent, to close at 6,251.95 yesterday, with dealers doubting the measure would help to bolster the market.
ADDITIONAL REPORTING BY FLORA WANG AND STAFF WRITER
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