Thu, Dec 27, 2001 page18

• Loosen restrictions on land, pundits say

  REVAMP To spur activity in the real-estate sector, experts suggest removing the tax on land transactions, increasing the cost of holding land and removing land-use controls

  • By Stanley Chou / STAFF REPORTER
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  In order to conduct a comprehensive reform of public finance, pundits suggest that the government release state-owned land to the private sector and increase public investment to improve the quality of life for the average person.

  "In order to liberalize the use of land and create new demand for land, the government should end current restrictions on land for the private sector," said William Lin (林蒼祥), dean of the finance department at Tamkang University (淡江大學) at a conference held yesterday by local business groups.

  "In order to improve the structure of government finance, the administration should conduct a comprehensive reform of public finance soon after Taiwan becomes a member of the WTO. A liberalization of the use of land and manpower and an increase of competitiveness in the private sector should be the government's primary goals," said Lin.

  Many restrictions on the use of land now exist around the country. Lin suggested that the administration revamp the current rules to provide greater flexibility for the private sector in utilizing idle land controlled by the state or state-run companies like the Taiwan Sugar Co (台糖). The government restricts the use of 96 percent of the nation's land in this manner.

  In addition, Lin suggested that the administration greatly reduce the number of employees to reduce public expenditures.

  This year, government expenditures totaled NT$1.7 trillion. Personal payroll and other regular expenses like interest payments consisted of NT$1.1 trillion. "There is, therefore, only NT$600 billion left for the administration to utilize for other needs," said Lin.

  Other pundits also proposed solutions to the current problems of public finance.

  "The administration should increase public investment [at the current rate] by borrowing money. This would not necessary increase the budget deficit," said Liu Tai-ying (劉泰英), chairman of China Development Industrial Bank (中華開發銀行).

  "As long as the money is used efficiently in areas that generate a multiplier effect, it would also increase tax revenue [later on]," he said.

  The multiplier effect is a phenomenon that refers to what happens to money after it's spent. Sometimes the use will drive lots of economic activity and sometimes it won't.

  For this reason, Liu strongly opposes the new NT$3,000 monthly subsidy for senior citizens.

  "The multiplier effect for such a subsidy is the lowest of all and would not provide much of a contribution to economic growth. It's will not be an honor for me to receive such a subsidy," stressed Liu, who is nearing retirement age.

  Another pundit suggested that the government completely abolish the current Land Value Increment Tax (土地增值稅).

  "In order to improve the quality of life, the government should release public land on a comprehensive basis," said Chi Schive (薛琦), president of the Taiwan Academy of Banking and Finance (金融研訓院). "The total percentage of land used by businesses and residences in Taiwan is only 4 percent, which forces more and more people onto less and less land and causes the quality of life to deteriorate," he said

  "In order to make the use of land more efficient, the Land Value Increment Tax should be completely abolished. Instead, the tax should be combined into the personal income tax. The tax rate on the land value tax (地價稅), however, should be increased.

  "By increasing the cost of merely holding land and decreasing the transaction costs for the use of land, an increase in economic activity would ensue," said Schive.
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