European and U.S. Debt a Warning: Taipei Must Not Underestimate Its Fiscal Crisis

European and U.S. Debt a Warning:
Taipei Must Not Underestimate Its Fiscal Crisis
China Times editorial (Taipei, Taiwan, ROC)
A Translation
August 4, 2011

Summary: President Ma worries about the European and American debt crisis. He must not ignore the domestic fiscal crisis. We remind him once again. We look mainly to the executive branch to cope with the fiscal crisis, as soon as possible, Do not wallow in feel good sentiment. If we refuse to face our fiscal problems, we will soon follow in the footsteps of Europe and the US.

Full Text below:

Russian Prime Minister Vladimir Putin has criticized the U.S. debt crisis, saying it left the global financial sector in chaos. He said the debt-ridden United States is the world's economic parasite. While speaking to foreign journalists, President Ma Ying-jeou said he was worried that the United States and European debt crisis would drag down Taiwan. But there is probably little we can do in response to the U.S. and European debt crisis. What President Ma really needs to worry about is Taiwan's fiscal crisis. The government has reached its borrowing limit. The tax rate has reached new lows. The government's fiscal situation has never been more strained. Next year a number of major public construction projects will have no funding. This has already had a serious impact on the government's effectiveness. The fiscal situation is alarming.

The Ministry of Finance recently announced the results of the Executive Yuan's tax reforms. It said that tax cuts led to a 10.8% economic growth rate last year. Some cabinet members said that framing the issue this might mislead the public. How to interpret the data may be a matter of opinion. But the tax burden (the ratio of tax revenues to GDP) is now at a 11.9%, a new low. This is a fact we cannot overlook. If this is not adjusted as soon as possible, the budget situation will be truly worrisome.

Just how serious is the fiscal crisis? The Bureau of Audit recently released its 2010 annual central government accounting report. According to the Office of Economic Cooperation and Development (OECD), the average income tax rate was about 28%. The rate for the Republic of China was significantly lower, less than half. Tax dependence (tax revenues over annual expenditures) fell from 73% in 2008 to 57.4% this year. This shows that tax cuts have serious undermined financial stability. Now consider the central government's outstanding debt. By the end of this year, it will reach four trillion nine hundred billion NT. It will account for 37.1% of the GNP over the last three years. It is now near the legal limit of 40%. The government's fiscal situation is grim. The Bureau of Audit has appealed to the Ministry of Finance, saying the debt crisis in Europe and America should offer us a lesson. It has urged a comprehensive review of the effectiveness of tax cuts. It seeks an effective solution to the balance of payments issue.

Over the past three years, central and local government debt has skyrocketed. Some counties and municipalities have difficulty meeting their annual payrolls. Last year the Control Yuan began to address the issue of increasing government debt. Hidden debt and huge fiscal deficits continue to worsen. They pose a threat to economic growth and national security. The Control Yuan asked the Ministry of Finance to correct the problem. The Control Yuan report said that our laws regulating public debt are inconsistent with international standards. This has led to serious distortions in our government debt statistics.

Alas, economic growth last year looked good. But tax revenues for the first half of this year have not regained their old level, prior to the financial tsunami. This is the result of tax cuts. In addition, the Ministry of Finance lowered the income tax rates by three tax brackets. It wanted to help low income persons. But the progressive tax rates actually benefitted those in high tax brackets more than they did those in low tax brackets. The tax cuts perversely increased the gap between rich and poor.

Over the past decade, DGBAS and the Tax Data Center have gone from using five income brackets, to ten income brackets, to twenty income brackets. But the gap between rich and poor has continued to increase. The problem is the unfair tax system. The primary source of income for the wealthy is real estate and capital gains on stocks, on which they pay little tax. Wage earners meanwhile, receive no relief whatsoever. As a result, wages account for as much as 75% of the income tax base. Under the circumstances, it is hard to argue that the income tax burden has become fairer,

Addressing the impact of tax cuts, Nobel economics prize winner Paul Krugman wrote that a supply side tax cut has almost never helped the economy. He cites actual figures to expose the lies of the Bush administration. He shows how the largest tax cuts benefit the top 1% the financial pyramid, who are the beneficiaries of a 37% tax cut. Yet the Bush administration claimed that the biggest beneficiaries were the middle class. It deliberately misled the public. Krugman denounced the Bush administration tax cuts, as tax cuts for the rich. They had a limited effect on boosting the economy, They led to the deterioration of the state's fiscal situation. Krugman's criticisms have enormous relevance for the Ma administration.

Compare our fiscal situation with the international fiscal situation. We cannot avoid the fact that the Public Debt Act does not define debt according to international standards. This leads to serious distortions in the debt statistics. Everything else on Taiwan conforms to international standards. Why not the definition of debt? One may wish to argue that tax cuts have brought about many benefits. But one must also confront the revenue shortfalls. These have seriously affected funding for government programs. After all, tax cuts are not a panacea. To revive our economy, we cannot rely exclusively on tax cuts. President Ma worries about the European and American debt crisis. He must not ignore the domestic fiscal crisis. We remind him once again. We look mainly to the executive branch to cope with the financial crisis, as soon as possible, Do not wallow in feel good sentiment. If we refuse to face our fiscal problems, we will soon follow in the footsteps of Europe and the US.

歐債美債為鑑 別低估台灣財政危機
2011-08-04 中國時報

俄國總理普丁日前痛批美國債務危機搞得全球財經界雞犬不寧，債台高築的美國是世界經濟的寄生蟲，馬英九總統接受國際媒體專訪時則擔心美國、歐洲債務危機將拖累台灣。然而，不論美債或歐債危機，我們恐幫不上忙，馬總統真正該憂心的是台灣的財政危機。由於政府舉債瀕臨上限、租稅負擔率創下新低，政府財政空前吃緊，明年度多項重大公共建設預算沒著落，已嚴重衝擊政務推動，這樣的財政狀況能不令人擔憂嗎？

財政部日前在行政院院會報告賦稅改革成果，強調減稅使得去年經濟成長率高達十．八％。遭部分閣員質疑這樣的論述可能誤導社會大眾。針對相關數據的解讀或許容有仁智互見，但租稅負擔率（稅收占ＧＤＰ比率）降至十一．九％的新低，確實是不能輕忽的現實，若不盡快加以調整，未來總體預算編列景況真的令人擔憂。

究竟台灣的財政危機有多嚴重？審計部日前公布九十九年度中央政府總決算審核報告指出，經濟合作發展組織（ＯＥＣＤ）租稅負擔率平均約二八％，我國則連一半都不到，明顯偏低。賦稅依存度（稅收占歲出比率）由二○○八年的七三％驟降至今年的五七．四％，顯示減稅已嚴重衝擊財政的穩定。再看中央政府未償債務餘額，今年底將達四兆九千多億元，占前三年ＧＮＰ平均數之三七．一％，瀕臨法定上限四○％，財政狀況嚴峻。審計部因此呼籲財政部應以歐美債務危機為鑑，全面檢討減稅成效，有效解決收支失衡問題。

最近三年來，中央與地方政府債務急速攀升，部分縣市年年面臨薪水發不出來的困境。監察院去年初即針對政府債務攀升、隱藏性債務龐大且財政赤字持續惡化，對國家發展與國家安全形成潛在威脅，對財政部提出糾正。監察院報告指出，我國公共債務法所規範的「債務」定義未與國際接軌，使得政府債務統計嚴重失真。

遺憾的是，去年經濟成長亮麗，但今年上半年稅收尚未回復到金融海嘯前的水準，這正是減稅的後遺症。此外，財政部調降綜所稅最低三個級距稅率，用意在嘉惠中低所得者，不過，綜所稅採超額累進公式，實際上高所得者所享受的減稅金額高於低所得者，這項減稅反而進一步擴大了貧富差距。

回顧過去十年來，不論主計處、財稅資料中心的統計，從五等分位、十等分位到二十分位，高低所得者貧富差距逐步擴大的趨勢一致而明顯，主要癥結在於稅制不公，富人主要所得來源如土地、股票等資本利得稅負微乎其微，而受薪階級的勞動所得一毛都逃不掉，使得綜合所得稅基中薪資所得比率高達七成五。在這樣的情況下，還要強調所得分配已趨於公平，恐怕很難有說服性。

針對減稅的效果，諾貝爾經濟獎得主克魯曼曾撰文指出，「紀錄上幾乎不曾支持過減稅對經濟供給面會有效。」他以具體數字揭穿布希政府的謊言，直指減稅真正受益最大是金字塔頂端一％的富人，享有減稅總利益的三七％；而布希政府卻宣稱受惠最大的是中產階級，刻意混淆視聽，嚴重誤導民眾。他大力批判布希政府透過減稅圖利富人，不但提振經濟效果有限，還導致國家財政惡化。克魯曼的諍言，對馬政府亦極具意義。

要拿台灣的財政狀況與國際比較，就不能避開《公共債務法》所定義的「債務」未與國際接軌的事實，導致債務統計嚴重失真。台灣樣樣都要與國際接軌，為何債務的定義不必接軌？如果要談減稅帶來諸多好處，就也應同步正視稅收短少已嚴重影響政務推動；減稅畢竟不是萬靈丹，台灣經濟要振興終究不能全依靠減稅。馬總統在憂心歐美債務危機之際，絕不能無視於國內的財政危機。我們要再次做這樣的提醒，主要是期盼行政部門儘早面對財政危機的課題，別再「自我感覺良好」，若是不願面對財政問題的隱憂，難保沒有多久，台灣恐也將步上歐美債務危機的後塵。