The Ministry of Finance recently announced that the government last year collected record-high tax revenue, exceeding its budget projections by NT$528.3 billion (US$16.03 billion). Determining how the surplus should be used has become a focal issue for the government and opposition parties.
The Chinese Nationalist Party (KMT) has proposed that the government distribute NT$10,000 in cash to each taxpayer to directly return the funds to the public.
Would that really support the long-term interests of the nation?
From the perspective of fiscal stability, it would be more cautious and forward-thinking to prioritize use of the surplus to reduce the national debt.
Many people mistakenly believe that tax revenue surplus means that the government has extra income, but that is not the case.
A surplus simply means that the national tax revenue collected exceeded the amount that was predicted — it does not mean that the treasury is overflowing.
When former president Tsai Ing-wen (蔡英文) took office in 2016, the central government’s debt was NT$5.39 trillion, Ministry of Finance data showed. It is expected to increase to NT$6.01 trillion this year, with interest payments alone of hundreds of billions of New Taiwan dollars annually.
Although using the surplus revenue for cash handouts would stimulate short-term consumption, it would not benefit the country’s financial system.
In contrast, investing in national debt repayment would reduce interest expenditures and improve the flexibility of the government’s financial operations.
One argument in support of the KMT’s proposal is that the economic benefits should be shared among every taxpayer.
However, a one-time subsidy would not address structural economic issues. If the government’s finances remain unstable in the long term, it might need to increase taxes or cut public spending, which would also affect everyone.
Using the surplus to reduce the national debt would free up resources that the government could invest in public infrastructure, education and social welfare to further enhance national competitiveness.
Many countries are facing high national debts. Poor financial management can exacerbate the issue and give rise to more severe economic crises.
In the past few years, the global economic environment has changed dramatically and rising interest rates might increase states’ financing costs. If the central government does not take advantage of its relatively stable financial situation to reduce the national debt, fiscal pressure is likely to increase.
Moreover, reducing the debt would improve the country’s credit rating, which would lower its financial costs and make Taiwan more competitive in the international market.
The smart use of the surplus revenue is crucial to the country’s fiscal stability and development. The government should avoid short-sighted fiscal maneuvers in search of instant gratification.
Rather than cash handouts, the government’s priority should be reducing the national debt to ensure fiscal resilience, while making appropriate public investments to enhance the nation’s competitiveness.
Sound fiscal policy is the cornerstone of long-term national development. Only through thoughtful planning can future generations be saved from bearing heavy financial burdens, with the added benefit of a more stable and sustainable economy.
Dino Wei is an engineer.
Translated by Kyra Gustavsen
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