Taipei Times (TT): The widening wealth gap has been receiving a lot of attention lately and many people have high expectations that tax reform could help improve this problem. How do you view this?
Christina Liu (劉憶如): Taxation is definitely an important tool to help lower a nation’s income disparity. Based on the current tax laws, the Ministry of Finance will continue to strengthen its tax collection mandate, while examining if anything in the current tax code should be revised to move it more in line with the principles of social justice and fairness.
President Ma Ying-jeou (馬英九) has discussed adopting an “ability-to-pay” principle and the ministry will follow this direction, and discuss it and any related issues in the near future in a Cabinet-based task force on financial integrity.
Photo: Chien Jung-fong, Taipei Times
TT: Does this mean you might consider levying a windfall tax, which you mentioned earlier this month? Also, since the common understanding of a windfall tax is one levied on industries recording above-average profits, what industries might you consider imposing it on in Taiwan?
Liu: We will definitely include the issue for discussion in the task force’s agenda if the public expresses a strong interest in it.
However, at this moment, it seems like the imposition of a windfall tax will not be the primary issue discussed, meaning it might not be addressed during the first round of task force meetings.
Basically, a windfall tax would not be imposed unless an industry was proven to be earning excessive profits from rises to its product prices because of certain global economic conditions.
TT: How about imposing a tax on the rich?
Liu: Regarding to idea of taxing the rich, we will look to follow the global trend. This means the ministry will research the taxation systems of other countries and see if there is anything applicable to Taiwan’s case.
However, with the current wave of globalization, we should also carefully consider the costs of imposing any new taxes. For example, if the nation’s investments decline because a certain tax is imposed, the domestic labor market and the nation’s economy could be adversely affected. It is very important for the government to carefully deliberate on this issue to make sure the right balance is reached.
TT: In November, a National Treasury Agency official said the nation’s debt is expected to reach NT$5.1 trillion (US$172.48 billion) this year, which accounts for about 37 percent of the average GNP over the past three years — getting closer and closer to the statutory debt ceiling of 40 percent. Is the ministry planning to enhance the statutory debt ceiling?
Liu: So far the ministry has no plans to enhance the statutory debt ceiling, so certainly we have to tap new sources to finance the government’s expenditure, as well as look for other areas of income.
Last month, when I still served as Council for Economic Planning and Development minister, the council signed a memorandum of understanding regarding future investments in Taiwan with Macquarie Infrastructure and Real Assets, a leading global alternative asset manager that specializes in infrastructure funds. This agreement proved that Taiwan remains an attractive investment market for a lot of foreign investors.
So from my point of view, the ministry can closely cooperate with the Ministry of Economic Affairs to find new financial sources, especially foreign investors, to finance the nation’s infrastructure, further helping lower government expenditure.
TT: Currently, Taiwan’s economy is expected to be powered by the twin engines of domestic demand and exports. Does the nation’s financial policy perfectly match up with monetary policy to drive up the economy?
Liu: We do not have too much space to discuss monetary policy considering the current global economic uncertainties. It might be best to adjust the balance between financial policy and monetary policy after the economy has digested any impact caused by the eurozone crisis.
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