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Cabinet backs tax redistribution plan
LESS IS MORE:
Amendments to a law on government revenue and spending would free up how money is handed to local administrations. In theory they'll get more cash
By Su Yung-yao
STAFF REPORTER, WITH STAFF WRITER
Thursday, Sep 27, 2007, Page 3
The Cabinet yesterday approved amendments to the Law Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法), which would increase tax-redistribution income for local governments.
The draft now proceeds to the legislature for review.
With an amended law in place, the Cabinet estimates that the tax redistribution fund would increase from NT$194 billion to NT$280 billion (US$5.9 billion to US$8.5 billion). Local governments would receive around NT$30 billion more in funds from tax redistribution and other subsidies.
The Cabinet also hopes to incorporate ordinary subsidy funds in legislation at a later date. In the meantime, the fund is worth around NT$130 billion a year. The government hopes to lower this figure to NT$80 billion a year.
Premier Chang Chun-hsiung (張俊雄) yesterday said the amendments would help decentralize money and power; increase tax revenue for local governments; and maintain or increase financial resources for local governments.
Under the proposed amendments, the system of fund allocation via fixed percentages would be replaced by a new formula.
About 94 percent of the funding is presently awarded by the central government directly to governments. Twelve percent is given to township administrations and 39 percent to county and city governments. The special municipalities of Taipei City and Kaohsiung City together receive 43 percent.
The remaining 6 percent is retained by the central government as an emergency reserve fund.
Under the draft amendment, the fund is split into two portions of 90 percent and 10 percent. A total of 67.5 percent of the total fund would be awarded to the various governments out of the former portion, while the remaining 22.5 percent would be awarded according to financial need and taking into consideration local government efforts to raise funds.
From the latter portion, 6 percent of the total fund would be used as a subsidy for special municipalities, counties and cities that receive less money than before.
The remaining 4 percent of the total fund in the latter portion would serve as a reserve fund.
In addition, special municipalities would receive 10 percent more in inheritance and gift taxes, while villages, townships and cities would receive 20 percent less.
Counties and cities would keep the 20 percent incremental land-value tax levied on residents, securing the local governments around NT$70 billion more each year.
The Cabinet yesterday also drafted a law governing zoning for administrative districts.
Under the draft, the central government would not have to acquire local council approval if it decided to merge local governments. But council approval would be required if the merger were proposed by the local governments themselves.
Additional reporting by Jimmy Chuang
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