The Cabinet of Premier Su Tseng-chang (
It happened again last week, when the Cabinet on Thursday night announced that Minister of Finance Joseph Lyu (
Lyu joined the government in 2002 to help revamp state-run enterprises such as Chunghwa Telecom, the Land Bank of Taiwan and the Bank of Taiwan. Although a seasoned banker, he has been under increasing pressure over the past five months for failing to push forward fair taxation. Moreover, his handling of stakeholdings in state-controlled financial institutions has not met the public's expectations, exemplified by the recent boardroom tussle at Mega Financial Holding.
Linking these issues to the decision to remove Lyu is, of course, speculation. But, without doubt, they touch on the Ministry of Finance's core tasks -- taxation, the national treasury and managing public stakeholdings -- now that the Financial Supervisory Commission, which was established two years ago, oversees the nation's banks, insurers and securities firms.
And so, when the Cabinet announced the appointment of Ho, the significance lay not just in why Lyu had to leave, but what the 54-year-old Ho can do to help address taxation disparities.
It is worth noting that Ho's appointment will help re-focus attention on the deterioration in the government's fiscal situation, a key factor that could impact on Taiwan's sovereign credit ratings, as Standard & Poor's and Fitch Ratings have warned lately.
Ho, who was a senior economist at the US Internal Revenue Service for more than a decade and who has experience helping the finance ministry draw up tax proposals, is concerned about the nation's shrinking tax base. He has suggested canceling certain tax exemptions on farm land transactions and on the trading of land reserved for public facilities.
He is also known to support the idea of adjusting inheritance and gift tax rates by lowering the maximum marginal rates to 40 percent from 50 percent, in a bid to help attract fund inflows.
Some say Ho is a good candidate for the finance portfolio, as he has the capacity to continue building a fair taxation environment, following on former finance minister Lin Chuan's (
The list of challenges awaiting the new minister is formidable: Can he play an instrumental role in building a public consensus on overhauling the taxation structure? Can he win legislative approval for a resumption of income tax on military personnel and civil servants? Can he persuade the Cabinet to stop offering tax incentives to certain industries, even though the Ministry of Economic Affairs and business circles have often emphasized the importance of such incentives in keeping businesses from moving abroad?
Apart from the taxation issue, can the new minister effectively manage public stakeholdings in state-controlled enterprises while at the same time not overriding the government's privatization policy? Can he devise a fair auction mechanism for state-owned land that addresses criticism that state assets have been sold too cheaply?
These are just a few of the daunting tasks awaiting the new minister. All of his skills will be required -- and perhaps a bit of luck.
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