It would be unwise to allocate a tax surplus to a sweeping distribution of NT$10,000 per person as proposed by the Chinese National Party (KMT), given the large national debt and relatively healthy private consumption so far this year. Reducing debt should be the government’s top priority, as it would bolster the nation’s fiscal resilience and capacity to finance key projects or to avert potential economic troubles.
KMT legislators said that a significant increase in tax revenue indicated that the economy grew vigorously and the government should pass the economic benefit on to the public. The government has had a tax surplus over the past four years, bringing the total surplus to NT$1.87 trillion (US$56.82 billion). Opposition party lawmakers called on the government to give the money to taxpayers and plan to push through such a proposal during the new legislative session. The NT$3.76 trillion in tax revenue collected last year has been added to the national coffers, greatly surpassing the Ministry of Finance’s annual budget plan by NT$528.3 billion. That is the most significant increase on record, attributable to strong securities exchange taxes and individual income taxes among other important categories, the ministry said.
It is galling to see KMT legislators seek to ingratiate themselves with the public using such a proposal without considering the sustainability of the nation’s debt. KMT legislators have mistaken a tax surplus for a budget surplus, or fiscal surplus. Taiwan is heavily in debt with an accumulation of NT$5.91 trillion as of Feb. 21, a mild improvement from an all-time high of NT$6.4 trillion recorded in May last year, the ministry said. That is equivalent to NT$257,000 per person.
It is not unusual for a government to issue a cash distribution to taxpayers, but it is typically done under special conditions. In most situations, a government distributes cash payments to those most in need rather than to everyone, with an aim to bolster the economy by expanding private consumption. For example, Seoul in 2023 issued consumption coupons to spur public spending to support its economy. China, Hong Kong and Japan have used similar practices.
In Taiwan, the government has distributed cash or coupons four times for every citizen, in an effort to prop up an economy battered by the COVID-19 pandemic and the global financial crisis. In the latest one in 2023, the government distributed NT$6,000 in cash for each person to help local restaurants, and companies in the retail and tourism sector that were severely affected by the pandemic.
Taiwan’s economy is expected to grow at a rate of 3.14 percent this year, indicating it is still on a growth track amid increasing macroeconomic uncertainty, the Directorate-General of Budget, Accounting and Statistics projected.
Other financial data showed that it is not urgent to distribute cash when it would sacrifice the nation’s fiscal strength. Retail sales in Taiwan in January rose 5.3 percent to NT$445.1 billion from a year earlier, a record high, the latest Ministry of Economic Affairs data showed.
It is logical to use the tax surplus to reduce national debt. In addition, the government should find a legal standard or revise existing rules to ensure the optimal and consistent utilization of tax surpluses. It should also establish new funds specifically to repay debt, as the government is not proactive enough to reduce debt. Over the past three years, it has only paid down NT$396 billion in debt and canceled borrowing of NT$384.5 billion. The tax rules might also require an overhaul, given that tax surpluses have been common over the past decade, except in 2020.
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