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Academics say tax revenue forecasts far too optimistic

Academics attending a symposium on the 2003 budget yesterday panned the projected increase in revenues as overly optimistic and warned against deteriorating financial conditions in light of the rising fiscal debt and shrinking tax base.

The forum was sponsored by the legislature's Budget Center, which is due to unveil its own evaluation later this month.

Lee Yun-jay (李允傑), who teaches public administration at National Open University, cited an international study as saying the increasing government debt would have a negative impact on the ability of Taiwanese businessmen to raise funds abroad.

"The country has accumulated such a vast sum of public debt that the Switzerland-based International Institute Management Development recently assigned Taiwan a bottom-two berth in its credit rankings," Lee said.

NT$200,000 per person

The total government debt amounts to about NT$3 trillion as of this year, an average of NT$200,000 per person, according to some estimates.

Lee expressed reservations about the planned increase in social welfare spending that will account for 18.3 percent of the budget for next year.

"The portion does not even include the proposed extension of senior-citizen stipends to retired workers, and the money earmarked for economic development constitutes only 14.5 percent," he said.

Of the latter category, some NT$40 billion is earmarked to cover losses incurred by the National Stabilization Fund, which tried to shore up the stock market this year, he added. Fearing the trend may lead to a complete collapse, Lee urged the ruling and opposition parties to make improving the country's financial health their top priority.

Overly sanguine

Sun Ke-nan (孫克難), a research fellow at the Chung-hua Institution for Economic Research, portrayed the predicted 5.8-percent rise in tax revenues for next year as overly optimistic, as the economy is expected to grow by only 3.5 percent over the same period.

"The inconsistent figures per se bespeak a structural accounting incongruity," Sun said, suspecting that the Cabinet purposely exaggerated projected revenues to justify its proposed spending.

Total central government expenditure for next year is estimated at NT$1.57 trillion, down NT$1.2 billion from the current year. The government expects to collect NT$1.299 trillion in tax revenues for the same period, leaving a deficit of NT$271 billion that will be offset by public bonds and sales of shares in state-run enterprises.

Doubts

Liu Dai-yang (劉代洋), who teaches business administration at the National Taiwan University of Science and Technology, said he doubts the projected revenue would be realized.

The government, seeking to stimulate economic activity, has provided industries various tax breaks and credits that amount to NT$450 billion, he noted.

"With tax base contracting, I fail to see how the government can collect that much revenue," he said, adding that the private sector owes some NT$230 billion in taxes.

Before the economy shows signs of a recovery, Liu said, the government should practice belt-tightening to make ends meet.

"But that has proved to be no easy solution in a political culture that encourages politicians to play the role of Santa Claus," he said, predicting that future elections will accentuate the government's financial woes.
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