Alarming Numbers: Is the Government Listening?China Times editorial (Taipei, Taiwan, ROC)
August 28, 2010
The government recently made public three sets of numbers. These numbers, which came from the Executive Yuan Directorate General of Budget, Accounting and Statistics (DGBAS), the Financial Data Center, and the Ministry of the Interior, revealed a consistent trend. The gap between rich and poor is greater than it was a decade ago. Actually, the numbers are merely the tip of the iceberg. The structural problems behind the numbers are even more important. These problems, which include an imbalanced, unjust tax structure, are not problems the poor can remedy by themselves. These are problems for which the government is clearly responsible. If the government concentrates only on changing industry structure, and ignores tax reform, it will not be enough.
The economy is booming this year. The DGBAS has revised its GDP growth rate upward, to 8.24%, a 20 year record high. Department stores in Taipei held a "VIP Night." In six hours they set a record by selling over 800 million NT in merchandise. Wives of wealthy tycoons used their credit cards to buy jewelry. They made staggeringly extravagant single purchases as high as 70 million NT. By contrast, those at the bottom of the economic ladder, are living from hand to mouth. Even average wage earners are making less than they did 10 years ago, after accounting for inflation. They have become the working poor.
The DGBAS Family Income and Expenditure Survey has five income tax categories. Between 2000 and 2009, the ratio between the disposable income of the poorest 20% and the wealthiest 20% increased from 5.57 times to 8.22 times. This does not include social welfare and tax revenue transfers. The Ministry of Finance Finanicial Data Center (FDC) has 20 income tax categories. Between 1998 and 2008, the income gap between the wealthiest 5% and the poorest 5% increased from 33 times to 66 times. Both numbers were record highs.
The DGBAS and FDC findings may or may not have blind spots. The former relies mainly on questionnaires. It has access to over 13,000 samples. But in fact gaining access to both the very rich and the very poor is extremely difficult. The questionnaire does not include real estate transactions and stock market gains. The Financial Data Center bases its findings mainly on the "taxable income" of over 5.4 million taxpayers. Capital gains and overseas income are not included. Therefore, these two statistics seriously underestimate the true gap between rich and poor. Second quarter Ministry of the Interior statistics showed a total of 108,000 poor families, and 260,000 poor people, Both reached record highs. But the survey does not include the "nouveau pauvres" able to work but unable to find jobs because industries relocated or went under due to lack of competitiveness. Low tech, low wage, and low income workers are members of the near poor, hence ineligible for government subsidies. According to conservative estimates, Taiwan has nearly one million nouveau pauvres. These invisible poor find it nearly impossible to share in the fruits of economic growth.
The FDC Family Income and Expenditure Survey found that over the past 10 years the average disposable income of the lowest income group has fallen from 275,000 NT to 222,000 NT. It has regressed to the level of 1991. People are asking questions. If the fruits of economic growth cannot be shared among all citizens, what is the point of such economic growth?
The growing gap between rich and poor is due in part to the impact of globalization and imbalances in industry structure. But an even bigger problem is an unfair tax system. As the DGBAS numbers show, the government has narrowed the wealth gap by means of social welfare and tax measures. Of the two, social welfare is becoming more important, while taxes are becoming less important. The impact of taxes two years ago was 0.16 times. Last year it fell to 0.13 times. The impact of the income tax has shrunk to the point where it is almost undetectable.
The Republic of China is the one of the world's few nations that do not tax capital gains. In recent years, it has continued to give tax cuts to the rich, further increasing the gap between the rich and the poor. The government's improper tax cuts have resulted in a loss of tax revenue, and increased financial constraints on the government. The central government debt will reach a peak in 2011. In a vicious cycle, fiscal difficulties will directly impact social welfare and education. Even civil service salaries may be impacted. Interior Ministry officials say frankly that "The real problem on Taiwan is that the government never taxes the rich."
Internationally, income inequality is usually measured by means of the Gini Coefficient. The higher the number, the greater the gap between rich and poor. Singapore, Mainland China, and Hong Kong have wealth gaps more serious than Taiwan. The Nordic countries, Japan, and South Korea, have wealth gaps less serious than Taiwan. Do we want to compare ourselves against our betters? Or our inferiors? If we compare ourselves against ourselves ten years ago, we find the wealth gap on Taiwan has increased significantly. We have over a million newly poor and near poor families scattered over all corners of our society. They are not included in the statistics. Yet President Ma had the chutzpah to say that "The wealth gap on Taiwan is not that serious."
Poor people rarely have the opportunity to speak out on their own behalf. Even when they do, no one listens. If the Ma administration is only willing to put a gloss on the economic growth figures, if it persists in complacency, if it ignores the increasing gap between rich and poor, the poor can do little about it.
Three years ago, President Ma criticized the ruling Chen administration. He said, "It is deeply regrettable that the Chen administration has turned a blind eye to the urgent needs of newly poor families." President Ma has been in office for over two years. The public must now ask President Ma whether he hears the voices of the poor.