The Ministry of Finance and the Taipei City Government yesterday made concessions to each other during a meeting of the legislature’s Finance Committee over a Cabinet-proposed amendment to the Public Debt Act (公共債務法) to redistribute local government debt capacity, but failed to reach a consensus on the amendment, leaving the 14 versions of the amendment pending further review.
A meeting has been scheduled to take place in two weeks to re-examine the draft amendment, which aims to adjust the debt ceiling for the special municipalities New Taipei City (新北市), Greater Taichung, Greater Tainan and Greater Kaohsiung, as well as Taoyuan, which is expected to be upgraded to a special municipality in 2014.
If the amendment is not adopted, special municipalities may find it impossible to draft a budget for 2014 due to an unreasonably low debt ceiling.
The Cabinet’s amendment means to achieve the adjustment by lowering Taipei’s debt ceiling and redistributing part of the city’s debt capacity to the other five municipalities. Under the Cabinet’s original proposal, Taipei would see its debt capacity cut by NT$202.3 billion (US$6.95 billion) to NT$85.5 billion from NT$287.8 billion.
The Taipei City Government has strongly objected to the cut, warning that the reduction would delay construction on the Xinyi and Wanda MRT lines.
“The city government hopes this will not happen,” Taipei Deputy Mayor Timothy Ting (丁庭宇) said yesterday.
Ting said the city government is willing to cooperate with the central government by accepting lowering its debt ceiling by NT$146.3 billion, with the central government taking the extra cut of NT$56 billion on its own.
Minister of Finance Chang Sheng-ford (張盛和) agreed that the amendment should not hurt infrastructure construction in Taipei, signaling a possibility that the ministry would accept Ting’s offer.
Throughout several rounds of negotiations, Chinese Nationalist Party (KMT) Legislator Lai Shyh-bao (賴士葆) said the ministry made concessions to cover the debt capacity decrease for the Taipei City Government.
That would take the debt limit for the central government to 40.8 percent of the average GDP of the previous three years, from the 41.2 percent set under the Cabinet’s amendment.
Under the Cabinet’s amendment, the central bank’s debt ceiling may stand at NT$5.61 trillion for the next fiscal year.
However, following the seven-hour legislative session, legislators failed to reach a consensus from the 14 versions of proposed amendments.
KMT Legislator Alex Fai (費鴻泰), the committee’s convener, suggested every party caucus propose an integrated version of the amendment for further discussion and conduct a review after two weeks.
The committee used the same process to review the proposed capital gains tax in securities transaction earlier this year, Fai said.
Taipei Mayor Hau Lung-bin (郝龍斌), who has protested against the original proposed amendment that slashed the city’s debt ceiling by 46 percent, said yesterday that both the ministry and the city government had made compromises, because local and central governments should join efforts to survive financial difficulties. He stressed the city’s ability to repay its debts via private investments and a recovering economy.
"Taipei City Government is willing to work with the central government at this difficult time, but the nation’s financial burden is not the sole responsibility of Taipei City. We agree with the lowering of the debt ceiling, but the policy must not affect major construction projects,” he said at Taipei City Hall.
If the city’s debt ceiling was lowered to NT$267 billion, it would cover only the city’s general budget and this year’s debt financing for public construction projects.
Hau said the ministry failed to communicate with the city government when it was drafting the amendment. However, the ministry later acknowledged its lack of understanding of Taipei’s finances. The self-redeeming public debt of Taipei’s MRT system, for example, is only 20 percent, which means 80 percent of the public debt comes from the central government. Without financial support from the central government, the fare of Taipei’s MRT would have to be increased at least three times for the city to pay off all the costs of the system.