Judgment Day for Financial Officials

Judgment Day for Financial Officials
China Times editorial
translated by Bevin Chu
July 17, 2007

During the past two months, Taiwan's stock market has gone crazy. From 8066 points on May 4, it rocketed to 9471 points on July 13. Trading volume increased from 113.9 billion dollars to 239.6 billion dollars. Normally speaking, the stock market is a window on the economy. Stock market trading volume and indices reflect economic fundamentals. What is unsettling about this latest round of stock market movements, is that no changes in the economic fundamentals can be detected behind these momentous changes. No dramatic changes in domestic consumer investment, in imports and exports, in cross Straits trade, in free trade area negotiations, or international market competitiveness. Most analysts believe that the stock market's current rise has to do with aggressive intervention by the ruling Democratic Progressive Party (DPP). Whether such aggressive interventions will yield long term results, remains to be seen.

Financial and economic analysts look at the current round of government interventions in two different ways. The first is the Central Bank's dual rate policy: Control of exchange rates and interest rates and strict controls over overseas funds, effectively imprison capital within the island. Under today's Divided China, the Taiwan region is an island economy, highly dependent upon imports and exports. The price of trade goods have always reflected fluctuations in international pricing. When domestic capital is abundant, the price of trade goods tends not to rise because it is linked to international pricing. Capital naturally flows to regional, non-trade oriented investments such as stocks and real estate, resulting in a simultaneous rise in stock prices and real estate prices. The current rise in stock prices and real estate prices is essentially a reenactment of the 1986 to 1987 bull market drama, but with a different cast of characters. As analysts have pointed out, those entering the stock market this go around and making a profit are mostly corporations subject to the Central Bank's rate policies, not individual investors late to the game. If due to poor fundamentals the bottom falls out of the market, the impact on individual investors will be serious. Caveat Emptor!

The Central Bank's dual rate policy has incurred a great deal of outside criticism. But it is after all, only a tactical, short term measure. The Central Bank can raise interest rates or exchange rates at will. It enjoys considerable latitude in this, and side effects are limited. By contrast, many of the Executive Yuan's "entitlement of the week" vote-buying schemes involve tax cuts and land planning. Any excesses will probably have irreversible and catastrophic consequences. Caution is advised.

Take tax cuts over the past two months for example. First, the Executive Yuan demanded an increase in the Land Value Incremental Tax for personal residences to 10%, and a change in requirements from "once in a lifetime" to "one residence in a lifetime." The Ministry of Finance dared not dissent, and timidly agreed. Next, the Executive Yuan approved its Foreign Workers Levy. This, along with its decree that expenses incurred by workers' spouses while returning to their native villages were tax exempt, constituted yet another bizarre and irrational tax cut measure. After which, the Executive Yuan approved a five year tax exemption for the logistics industry, on the basis that it was an emerging industry of strategic importance, resulting in billions of dollars of loss in tax revenues. The Executive Yuan's policies regarding high value tracts of land in Taipei and Kaohsiung were reactive, hasty, and ill-considered. These tracts were nominally under the supervision of the Bureau of State-Owned Property of the Ministry of Finance. In fact, the bureau colluded with the Executive Yuan to bestow political patronage.

As we can see, the government's monetary policies and fiscal policies are short term stimulus measures. Undue political influence on short term economic trends forced the US government to respond to demands for central bank and monetary policy autonomy. The public regards even such short term economic measures unacceptable. How can it accept the subordination of long term economic development, tax policy, and agricultural policy to whatever regime happens to be in power? Take rural development for example. Every plot of farm land developed is one more plot of farm land gone forever, never to be restored to its original condition. Shouldn't such matters be subjected to meticulous debate before reaching hasty verdicts? Take the use of tax incentives to encourage speculation on rural land for example. What kind of half-baked financial policy is that? Take the logistics industry's five year tax exemption for example. How does this industry merit listing as an "emerging industry" deserving of tax exempt status by the Ministry of Finance? Don't such matters need to be debated with outside parties? If the Ministry of Finance is going to agree to any and all demands for tax cuts, what do we need a Minister of Finance for?

The DPP buys votes by means of pork barrel patronage. We have learned to accept it. But when it provides political patronage by means of short term tax cuts, using the pretext of systemic reform, that we can never accept. Do the Ministry of Finance and the Economic Development Advisory Conference have no opinion about such matters? Under pressure from tax cuts in other areas, Taiwan's business taxes have always been difficult to collect, and established a new low in 2002. Total revenues were only 150 billion. Combined efforts by the public and former Ministry of Finance officials eventually increased revenue to nearly 330 billion by the end of 2005. We must remind Minister of Finance Ho Chih-chin that our actions are being recorded. By this time next year, everyone on Taiwan will be able to see the amount of business taxes and individual income taxes collected in 2007. Whether inheritance taxes are reduced, whether procedures for investigating tax evasion are changed, whether ministry level officials have relinquished their nationality to evade taxes, are all trivial matters. The future prestige of the Minister of Finance will depend solely on whether he can protect the nation's assets and manage the nation's finances. Nothing else.

中時電子報
中國時報 　2007.07.17
財經官員終究要面對歷史評價
中時社論

最近兩個多月，台灣的股票市場發瘋一樣狂漲，由五月四日的八千零六十六點，暴漲到七月十三日的九千四百七十一點，成交量也由每日一千一百三十九億上升到二千三百九十六億，堪稱驚人。照理說，股市是經濟的櫥窗，股市的交易狀況與指數，都應反應經濟基本面的情形。但是令人不安的是，這一波股市飆漲，背後似乎找不到什麼經濟基本面的大變動；無論是國內消費投資、國外進出口、兩岸經貿、自由貿易區談判、國際市場競爭環境，都沒有什麼劇烈的改變。一般分析師認為，這一波股市上漲，大多與台灣政府的「作多」政策有關。這樣的作多政策究竟有什麼長期後果，值得我們關注與討論。

許多財經媒體分析，這一回合的政府作多，可以分為兩個方面來看。其一是中央銀行的雙率政策：透過匯率與利率的雙重管制，並對海外基金嚴加看管，等於是把資金「鎖」在台灣島內。台灣是一海島經濟，進出口一向暢旺，貿易商品的價格也一向隨國際價格波動。當國內資金充裕時，貿易商品的價格因與國際接軌而不易上漲，於是資金自然流向如股票與房地產等地區性非貿易財，造成股價與房地產價格的雙重上漲。就本質而言，此次股價房地產雙漲，與一九八六至八七年股價狂飆有異曲同工之處，唯一的不同是主角換人。分析師指出，此次進場股市獲利者多是受央行雙率政策鎖住資金的法人，而後來追進市場的則為散戶。萬一將來股市因基本面支撐無力而回檔，其對散戶的衝擊當然也較大，股市散戶不可不慎。

中央銀行的雙率政策雖然招致外界頗多批評，但畢竟只是戰術面的短暫作為；央行要升利息、要調匯率，都是彈指之事，調整空間大，也不會留下太多後遺症。相對而言，行政院最近推出的一周一利多政策，其中不少都牽涉到租稅減免與國土規畫，一但濫行放寬，將來都是覆水難收，可以說是後患無窮，不可不慎。

以最近兩個多月以來的減稅案為例。首先，是行政院要求土增稅自用住宅優惠稅率為一○％，由一生一次改為一生一屋，財政部完全不敢表示意見，僅唯諾接受。接著，行政院又通過外籍員工租稅優惠，加上員工配偶返鄉支出不列入薪資所得，又是一項莫名其妙、不合租稅學理的減稅措施。然後，行政院又同意將物流業五年免稅列為新興重要策略性產業，造成數十億營所稅稅收的損失。在減稅之外，則是北高等地數筆精華土地的釋出政策，雖然業務由財政部國有財產局主管，但是卻完全來不及做主動、縝密的規畫，卻配合行政院利多釋放的演出。

如前所述，不論是政府的貨幣政策、支出政策，都是刺激景氣的短期性戰術操作。美國政府早年以因為此類短期戰術操作過多，以政治力影響經濟的過度波動，乃有央行獨立、貨幣政策獨立的呼籲。連輿論都對此類短期經濟戰術操作期期以為不可，那麼關係著長遠經濟發展的租稅政策與土地政策，又怎麼可以隨著政治氣氛而隨意讓步呢？以農村改建為例；農地每建設一塊就少一塊，可見未來均難以回復原狀，這種事能夠不經縝密討論就倉卒定案嗎？以租稅為手段鼓勵農村炒地皮，這是哪一種碗糕的財政管理？再以物流業五年免稅為例，它究竟「新興」在什麼地方，值得財政部將之列為免稅對象？這些事難道不需要與外界討論？如果什麼樣的減稅財政部都能答應，那麼還要財政部長幹什麼？

民進黨以「政策」做選舉利多，我們不滿意，也只能勉強接受；但若要以制度改革或租稅減免來創造短期的利多，我們就難以茍同，而財政部與經建會更是不能沒有意見。在各種租稅減免的壓力下，台灣的營所稅始終難以課徵，在二○○二年達最低，決算僅一千五百億。在全民支持、輿論壓力與歷任財政部同仁的共同努力下，營所稅在二○○五年終於達到近三千三百億。我們要提醒何志欽部長，凡走過必留下痕跡，明年此刻，全台灣人民都會看到二 ○○七年營所稅與綜所稅的決算金額。遺產稅減不減、逃稅稽查公式改不改、部長有沒有放棄外國籍，都只是雞毛蒜皮的小事；財政部長的未來聲望，就只看他在任內能不能顧好國家財產與國家財政，如此而已！