The Alliance for Fair Tax Reform (AFTR) yesterday lashed out at the government for seeking to amend the law to relax regulations for the debt ceilings of central and local governments, saying it would aggravate the nation’s already strained fiscal conditions.
“The government’s claim that the reduction of gift and business income taxes and a trade pact with China would boost domestic investment and increase tax revenues is apparently a lie,” AFTR convener Wang Jung-chang (王榮璋) told a media briefing at the legislature.
“If tax revenues were to increase on the robust economic outlook, why would the administration of President Ma Ying-jeou (馬英九) still raise the government’s debt ceiling?” Wang said.
The nation’s Public Debt Act (公債法) sets the combined debt ceiling for the central and local governments at 48 percent of the average nominal gross national product for the previous three years, with the central government at 40 percent, special municipalities at 5.4 percent, counties at 2 percent and townships at 0.6 percent.
The legislature’s Finance Committee completed a preliminary review earlier this month of a draft bill to remove the combined ceiling of 48 percent and change the calculation method used to determine the debt ceilings of special municipalities, counties and townships.
The proposed amendment would adjust the ceiling for special municipalities to 200 percent of the total amount of their general and special budgets, while that for counties would be 70 percent and that for townships would be 25 percent.
“This means that local governments could easily bloat their budgets just so that they could borrow more money without being subject to the GNP debt ceiling stipulated in the current law,” AFTR spokesman Sun I-hsin (孫一信) said.
It is estimated that the five new special municipalities will collectively produce debt of up to NT$1.2 trillion (US$37.43 billion) under the new law, which is NT$324.9 billion higher than the current legal cap, Sun said.
In order to prevent bloated budgets, the AFTR has suggested that the debt ceiling of local governments be determined by their annual tax revenues instead of their general and special budgets, adding that they can adjust the outdated valuations of local properties to collect more taxes.
Ministry of Finance statistics show the government’s public debt is forecast to reach NT$4.6 trillion at the end of this year, accounting for 35.2 percent of GNP — only 4.8 percentage points from its debt ceiling.
However, Chien Hsi-chieh (簡錫土皆), another AFTR spokesman, accused the government of hiding the truth from the public by falsifying accounts of its debt, saying that the real situation was far worse.
“Taiwan’s public debt actually accounts for 116 percent of its GDP, or NT$15 trillion, based on an estimate of the statistics center at the legislature,” Chien said, adding that it is almost double the 60 percent debt ceiling set by the IMF.
Chien expressed concern that Taiwan could become a second Greece suffering from a debt crisis if the government continued to raise its debt ceiling and borrow more money.
“The NT$15 trillion translates to around NT$750,000 for every citizen based on the current population of 23 million people already,” he said, worrying that it might cause serious problems to future social welfare programs such as national and labor pensions.
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