Fiscal Sustainability Policy Debate Must Continue

Fiscal Sustainability Policy Debate Must Continue
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
August 9, 2011

Summary: Executive Yuan political appointee Chu Ching-yi has clashed with Minister of Finance Li Yi-teh. Chu pointed out that the low tax burden would "make it impossible for the government to survive." This shows that the tax system, which has given priority to economic development, is out of balance, and is now leading to our government's fiscal collapse.

Full Text below:

Executive Yuan political appointee Chu Ching-yi has clashed with Minister of Finance Li Yi-teh. Chu pointed out that the low tax burden would "make it impossible for the government to survive." This shows that the tax system, which has given priority to economic development, is out of balance, and is now leading to our government's fiscal collapse.

The government has long relied on tax cuts to spur economic growth. But this approach has led to the loss of tax revenue. It has made the government oblivious to this structural problem in its fiscal affairs. Family members may publicly air the family's dirty laundry. But infighting within the cabinet must not stop debate. The government must respond to questions about the fiscal sustainability of the economy. It must find a solution acceptable to the public.

Under normal circumstances, a low national tax burden need not mean fiscal unsustainability. But the tax burden remains low, government spending remains high, and the debt is steadily increasing. Together, these add up to a chain reaction fatal to fiscal sustainability. As a cabinet member, Chu Ching-yi has touched a raw nerve. He has slaughtered a sacred cow. Onlookers in the government and opposition must not regard this as nothing more than a war of words or battle of wills between two political appointees.

What precisely is fiscal sustainability? In December 2009, following the financial tsunami, the Asia-Pacific Economic Cooperation (APEC) convened a seminar in Malaysia on strategies for fiscal stability and economic recovery. At the time, the definition of fiscal sustainability rested on two principles. First, the public debt to gross domestic product (GDP) ratio must not be too high, Second, debt must be limited, allowing room for for the next fiscal crisis. Now let us apply these two principles to Taiwan. The Public Debt Law stipulates that government debt at all levels must not exceed 48% of the GNP for the previous three years. For the central government, that figure is 40%. By the end of this year, the central government estimates that debts exceeding one year will approach 37%. Existing debt is almost 90% of the debt limit. Based on the government's own debt limit redline, the national debt is already too high.

How dangerous are high levels of debt? That depends on government solvency. Tax revenues are the government's most dependable source of income, Naturally it is an important way to limit debt. But in recent years the government has adopted an expansionary fiscal policy in response to the financial tsunami. It has aggressively cut taxes. It has accumulated a great deal of debt. As a result, over the past three years, it has collected 75 billion NT less in taxes than before. The tax burden in 2008 was 13.9%, By 2010 it fell to 11.9%. Total tax revenues as a percentage of the government's annual expenditures fell from 73% to 61%, Government solvency declined markedly.

Government income remained low. Government expenditures remained high. This forced the government to borrow to get by. Over the past three years the government accumulated nearly one trillion NT in new debt. Its single year budget deficit, jumped from less than 1% of GDP to over 3%. Clearly the data shows the fiscal situation on Taiwan moving toward extremes. Incomes are lower. Expenditures are higher. Debts are higher. The Ministry of Finance touted its tax cuts and ultralow tax burden as political accomplishments. Chu Ching-yi accused it of misleading the public. The fear is that the government and the public will become accustomed to the status quo. This will plant the seeds of irreversible fiscal ruin.

The government's debt structure differs from the United States, which is also mired in debt. Ours is not foreign debt. Our debt is domestic. Seventy percent of that debt is held by government banks. The national debt may be approaching the limit. But there is no risk of imminent default. Chu Ching-yi warned that "Obviously such a fiscal policy is unsustainable." He was not being alarmist. The government continues to ignore the warning signs. It clings to the "tax cuts are political accomplishments" mentality, The high debt burden means high interest on the debt, It means structural rigidities in government expenditures. It means a vicious cycle of debt owed on debt. The government cannot jump start the economy. It cannot meet the aforementioned second principle of financial sustainability. The high debt burden may even hijack monetary policy. Increasing interest rates increase the government's debt interest expense.

Can the government ensure its fiscal sustainability? This cannot be determined merely by looking at the amount of debt or the tax burden. Two government officials engaged in a battle of wills. Their respective definitions and interpretations of fiscal sustainability represent two extremes. They have laid their cards on the table. How can they not intersect? The government must establish a long-range fiscal strategy. It must determine how much money the nation requires. It must determine the magnitude of the nation's fiscal structure. It must determine how much tax revenue is adequate. It must determine the impact of these factors on the deficit, Only then can it objectively evaluate the nation's fiscal affairs. Only then can it alter its fiscal policy accordingly.

財政永續論辯不應停格於政策內訌
【聯合報╱社論】 2011.08.09

行政院政務委員朱敬一槓上財政部長李述德，點出租稅負擔率偏低「會讓國家活不下去」的問題，凸顯稅制長期以發展經濟為先的失衡表現，正使台灣朝著財政基石崩解的道路前進。 

仰賴減稅帶動經濟的執政習慣及對稅收流失的無感，確已降低執政者對財政結構出現危機的警覺性。自家人自揭瘡疤之舉，不應停格在內閣裡的內訌，當政者須為這場質疑財政永續的爭辯，找出社會能夠接受的答案。 

一般情況下，國民租稅負擔率偏低，不等於國家財政無法永續；但當租稅負擔率偏低、政府支出不減、舉債日增等三者呈現連鎖反應時，就是財政永續致命的威脅。身為內閣成員，朱敬一主動挑激脆弱財政的敏感神經，打破了當局者迷的定律。旁觀者不論在朝、在野，都不該視之為吵過就算的口水戰，更不能當成是兩位政務官彼此唇槍舌劍的意氣之爭。 

然而，什麼是財政永續？二○○九年十二月，亞太經濟合作會議（ＡＰＥＣ）在金融海嘯後，特別在馬來西亞舉辦一場促進財政穩定與經濟復甦策略的研討會，當時即定義財政永續必須建立在兩項基本原則上，一是公共債務占國內生產毛額（ＧＤＰ）比率不能太高，二是控制債務以為下一次危機預留財政空間。依循這兩大原則來看台灣，公共債務法訂定各級政府債務餘額不能超過前三年國民生產毛額（ＧＮＰ）的百分之四十八，中央政府則為百分之四十，而今年底時，中央政府估列一年期以上債務餘額比率已接近百分之三十七，現有國債已逼近舉債限額的九成。就政府自己設下的債務警戒線而言，我國的國債已不可謂不高。 

高額國債的危險度，取決於國家償債能力的強弱。做為國家最穩定財源的賦稅收入，自然是控制債務的重要命脈。但近年來，政府因應金融海嘯採行擴張性財政政策，積極減稅、大量舉債的結果，這三年累計減徵七百五十億元稅捐，租稅負擔率因此從民國九十七年的百分之十三點九，滑落至九十九年的百分之十一點九，賦稅收入占政府歲出淨額比重也從百分之七十三，跌落到僅剩百分之六十一，財政支撐的穩定力明顯下降。 

收入未增、支出不降，迫使政府必須舉債度日，近三年政府新增債務金額幾近一兆元；單一年度入不敷出的財政赤字，占ＧＤＰ比重則從穩定的低於百分之一水準，跳升到百分之三以上。顯然，數據呈現出來的台灣財政現況，正朝向低收入、高支出及高負債的兩高一低趨勢發展。朱敬一質疑財政部拿減稅、超低租稅負擔率當政績是一種「誤導」，怕的就是政府與國人一旦對現況習以為常，將會埋下日後財政結構扭轉不易的後患。 

我國的國債結構，與正陷在債務泥淖中的美國不同。我政府並無外債，現有的國債都是內債，而且七成握在公股銀行手上，即使國債逼近上限，也沒有迫在眉睫的違約壓力。但是，朱敬一「用膝蓋想都知道這樣的財政無法永續」的說法，也非危言聳聽，只要政府繼續無視債務發出的警訊，堅持「減稅才是政績」的心態不變，高額國債的債息負擔，會使政府支出結構僵化，陷入以債養債的惡性循環，無力帶動經濟，不符前述財政永續的第二個原則；甚至可能綁架貨幣政策，因為升息將加重政府債息支出。 

然而，台灣有無維繫財政永續的能力，單憑國債金額多寡或租稅負擔率高低仍不足以論斷。兩位政府高官挑起的戰火，對財政現況的描述與解讀，可視為兩種極端的代表。交鋒既已檯面化，豈能沒有交集。執政者有必要建立一套中長程財政策略，確立國家財政所需規模，用以檢驗租稅適足性與赤字缺口的變化，從中尋求調整財政體質之道；如此，有關財政良窳的爭辯，才能有客觀的評價。