The issue of the nation’s growing debt was one of the hotly debated topics in the run-up to last Saturday’s presidential election.
Democratic Progressive Party Chairperson Tsai Ing-wen (蔡英文), who was defeated in the polls, presented a policy platform during the campaign that aimed to halve the government’s fiscal deficit in four years and achieve a balanced budget in eight years.
Her presentation was designed to highlight Taiwan’s deteriorating fiscal situation during President Ma Ying-jeou’s (馬英九) first four-year term in office.
With Ma’s re-election, many academics and civic watchdog groups have expressed the hope that he will give top priority to trimming the national debt through tax increases and spending cuts in his second term.
According to Ministry of Finance statistics, the central government’s outstanding debts stood at NT$3.779 trillion (US$125.97 billion) when Ma took office in 2008. The figure has since soared to NT$5.137 trillion, marking an increase of more than NT$1.3 trillion in four years under his leadership.
The sharp increase in the national debt in the past four years could be partly attributed to expanded government expenditure to finance Typhoon Morakot reconstruction projects and economic stimulus packages to cope with the 2008-2009 global financial crisis. Nevertheless, the speed of the debt growth has led many to raise concerns.
Anti-Poverty Alliance of Taiwan convener Chien Hsi-chieh said that about NT$170 billion has been set aside in the central government budget for interest payments on its huge outstanding debts.
Moreover, the government should not continue to hide the size of its debt, as this could mislead the public into believing that the government’s fiscal status remains healthy, he said.
Based on the ministry’s national debt clock, the country’s national debt is about NT$5 trillion. However, Chien said the actual figure is much higher.
Wang Jung-chang (王榮璋), convener of the Alliance for Fair Tax Reform, said that the national debt had already reached NT$21 trillion, if hidden debts are included.
“Taiwanese will soon find out that our per capita debt burden soared to NT$1 million during the country’s centennial,” Wang said.
Huang Ming-sheng (黃明聖), a National Chengchi University finance professor, said that Ma’s second term could be the best time to enact sweeping fiscal reforms.
“In future, the government must identify its sources of funding before adding any new expenditure,” Huang said.
In addition, he said, public construction projects should be subject to stringent cost-efficiency analyses before they are launched.
“The government should not build any new stadiums or exhibition halls that would be of little use,” he said.
Lin Hsiang-kai (林向愷), a National Taiwan University economics professor, said the government should refrain from launching any public construction projects simply to boost domestic demand.
“Its NT$85.6 billion consumption coupon project and NT$500 billion domestic demand expansion projects have contributed little to the goal of expanding domestic demand,” he said.
Meanwhile, Chien and Wang suggested that the government introduce a capital gains tax on stock and land transactions to increase revenues and achieve the goal of equitable wealth distribution.
“At present, rich people pay too little in taxes because their main sources of income, such as gains from land and securities trading deals, are mostly tax-free,” Chien said. “If Ma fails to take bold steps to correct this injustice, the wealth gap will widen in the years ahead and his place in history will be at stake.”