Amid clashes between lawmakers from ruling and opposition parties, amendments on revenue allocations were approved by the legislature late on Friday night, allowing local governments to secure an additional NT$375.3 billion (US$11.5 billion) in funding from the central government.
It was the first time in more than 25 years that the Legislative Yuan had revised the Act Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法).
Lawmakers of the opposition Chinese Nationalist Party (KMT), which proposed most of the passed amendments, and the Taiwan People’s Party (TPP) hope the new law would return more revenue to local governments to support their public work projects. Ruling Democratic Progressive Party (DPP) legislators, on the other hand, said the changes would squeeze the central government’s budget.
Photo: Liu Hsin-de, Taipei Times
Under the current practice, the central government is allocated 75 percent of the country’s total taxation or other revenue, while local governments are given 25 percent of available funding, compared with a 60 to 40 percent allocation ratio before 1999.
The amendments proposed by opposition lawmakers aimed to allow local governments to take back funds under the previous 60 to 40 percent allocation ratio.
Among the approved amendments, 11 percent of income tax revenue would be allocated to local governments, while business tax revenue after uniform invoice lottery prize payouts would be completely given to local governments.
Currently, 10 percent of income tax revenue and 40 percent of business tax revenue after deduction of uniform invoice prizes go to local governments.
The newly revised law also stipulates that land value increment tax belongs to special municipality and county and county-level city taxes, and that the growth in land value results from efforts made by local governments, so the tax revenue from it should completely go to local governments.
The change came in contrast to the current regulation, which allows the central government to allocate only 20 percent of land value increment tax revenue to local governments.
The KMT caucus expects the revised revenue allocation rules would help local governments to improve their financial conditions and tilt toward a balance between urban and rural areas around Taiwan.
The TPP caucus said the amendments are expected to allow local governments to secure more funding for their construction projects.
However, DPP caucus chief executive Rosalia Wu (吳思瑤) said the newly revised law was unlikely to deliver fair revenue allocation and would hurt Taiwan’s fiscal discipline.
In response to the passage of the amendments, the Ministry of Finance expressed concerns that the allocation of an additional NT$375.3 billion to local governments would create a severe adverse impact on the fiscal conditions of the central government and undermine the welfare of the entire country.
The ministry said that the new revenue allocations could affect the implementation of policies related to economic development, social welfare, national defense and social security.
It also accused the opposition parties of failing to have thorough discussions before pushing the amendments through the legislative floor.
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