The Tax Reform Alliance yesterday demanded Minister of Finance Lee Sush-der (李述德) resign to take responsibility for the worsening economy, saying that his tax reduction policies had run the country even deeper into debt and increased the wealth gap.
“Since Lee assumed office more than a year ago, the loss of tax revenue because of tax reduction policies for the wealthy has amounted to NT$180 billion [US$5.47 billion],” alliance spokesman Chien Hsi-chieh said at a press conference yesterday.
The government will take out a loan of NT$508 billion to boost the economy, improve flood management, finance post-Typhoon Morakot reconstruction and pay off principal on government debt — a record for a single year.
The government’s budget statement said that debt will reach NT$4.55 trillion by the end of next year, accounting for about 36 percent of GNP, close to the legal ceiling of 40 percent stipulated in the Public Debt Act (公共債務法).
“If the special debts [not subject to the act] are taken into account, each citizen’s share of the government’s debt would be NT$630,000, and would rise to NT$700,000 next year,” Chien said.
The alliance estimated that tax revenue losses following adjustments of estate, gift and business income taxes decreased the tax burden on the rich by about NT$180 billion, while salary earners, who contribute 75 percent of the government’s annual revenues, received a total income tax cut of just NT$21.6 billion.
Chien said that Lee should be included in the upcoming Cabinet reshuffle, expected next week, as his tax policies had led to social injustice and because the downgrading of the country’s sovereign rating by international credit rating companies would have a negative impact on the competitiveness of local businesses.
Standard & Poor’s downgraded Taiwan’s sovereign rating in May, while Fitch Ratings announced during a conference in Singapore on Thursday that it might lower the country’s sovereign rating in its new outlook by the end of the year or early next year.
Taiwan’s local currency rating remains at “AA,” the same as its previous rating.
However, the extra spending on rebuilding homes and infrastructure could combine with other weaknesses in Taiwan’s economy to make a lower rating necessary, Fitch officials said.
“All I can say now is that [a downgrade] is a possibility,” said Jonathan Lee, a Taipei-based senior director of Fitch’s financial institutions, referring to the long-term local currency rating for Taiwan.
“The typhoon disaster is just one of the factors behind the review. We have kept a high alert on the overall economy,” he said.
ADDITIONAL REPORTING BY AFP
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