There was good news for local governments and bad news for taxpayers on Tuesday as the Legislative Yuan enacted a law authorizing local governments to collect local taxes. This is in essence a tax increase, since local governments will now be able to levy taxes on a wide variety of things, ranging from creating noise pollution and owning pets to tourism and street vendors.
It is no surprise that the taxpayers have not rushed to embrace the new law. However, local governments are not exactly thrilled about it either. They fear the central government is leaving them with the role of the heavy while it gets credit for not raising national taxes.
Governments at every level are short of funds but the central government doesn't dare raise taxes ahead of key elections, including the 2004 presidential poll. It would be political suicide. The central government has tried everything to increase revenues without hiking taxes. The prime example is the thorough and widespread tax audits on income tax filings. Local governments are also looking for ways to increase revenues, as seen by Taipei's sudden enthusiasm for strictly enforcing traffic laws which has resulted in a record number of tickets being issued.
Under the new law, local councils or legislatures will have to approve the collection of new taxes. Given the political volatility of such a move, it is unlikely that many local governments will actually decide to levy new taxes in the foreseeable future. Some local governments had hoped that they would be able to levy taxes on those outside their jurisdiction -- such as the downstream water users of reservoirs -- which would eliminate the risk of a backlash from their own constituents. Unfortunately, the new law specifically bans such taxes. Local governments are prohibited from collecting taxes for trade and natural resources or mineral products outside their borders, as well as cross-district government enterprises.
No wonder Taipei Mayor Ma Ying-jeou (
Hsinchu County Commissioner Cheng Yung-chin (
The new law brings neither money nor gratitude for anyone. So why did the central government even bother to enact it?
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