Mon, Jul 14, 2008 page12

• DPP tax refund bill unlikely to pass

  ECONOMIC ASPIRIN Some lawmakers said that the bill could boost consumption, but that it was more likely to act as short-term relief instead of a long-term cure

  • By Crystal Hsu / STAFF REPORTER
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  The tax refund bill proposed by the opposition Democratic Progressive Party (DPP) has a slim chance of clearing the legislature this session as ruling lawmakers doubted it was necessary, though some agreed it could help boost private consumption.

  The legislature’s Finance Committee is scheduled today to take up the bill, which seeks to allow taxpayers with an annual income of NT$495,000 (US$16,300) or less to obtain a tax refund of NT$6,000 from last year’s income tax.

  The draft also calls for couples who earn NT$995,000 or less a year to get another NT$6,000 refund and an extra NT$4,000 for each of their dependents. It further proposes awarding a NT$4,000 subsidy to people who live below the poverty line.

  DPP legislator Gao Jyh-peng (高志鵬) said the measure would be more effective in expanding domestic demand than the stimulus package introduced by the Chinese Nationalist Party (KMT) administration.

  The Cabinet has proposed a special budget of NT$130.1 billion (US$4.28 billion) to help local governments finance a variety of spending programs, with a view to raising the GDP growth by 0.45 percent to 4.78 percent this year.

  “It would be more effective for the government to encourage consumer spending by giving the money to the people directly,” Gao said in a telephone interview.

  Gao said the tax refund program would cost over NT$60 billion. He said the government could pay for it with surplus tax revenues as it had collected more taxes than projected in recent years, the DPP lawmaker said.

  “The government could also opt to ditch the stimulus plan and use the money to fund the tax refunds instead,” Gao said.

  Gao admitted that the tax refund bill was unlikely to make headway as the ruling party controls a solid majority in the lawmaking body.

  KMT caucus whip Lin Yi-shih (林益世) said the ruling and opposition parties remained divided on the issue, and the review today would be limited to a general discussion to avoid conflict.

  KMT lawmaker Lee Hung-chun (李鴻鈞) said he had reservations about the proposed tax refund. Like a stimulant, Lee said the proposed tax refund, while promising immediate relief, would prove no lasting remedy to lift consumer confidence.

  The nation’s consumer confidence index dropped last month to its lowest point since November 2001 because of rising commodity prices and bearish stock market sentiment, the National Central University’s Research Center for Taiwan’s Economic Development reported on June 27.

  “People will shy away from spending if fuel and food prices keep rising and their income remains unchanged,” Lee said by telephone.

  He said it was more urgent for the government to adopt measures to contain inflation and boost economic growth, but that the tax refund would serve neither purpose.

  Norman Yin (殷乃平), a professor from the Money and Banking department at National Chengchi University, agreed for different reasons.

  Yin said the tax refund plan, while positive on consumer spending, would contribute little to GDP growth. Like extra social welfare windfall for the poor, Yin said, the measure would add strain to the nation’s fiscal health with national debts hitting NT$4 trillion already and expected to climb.

  The government has proposed funding the stimulus plan with borrowed money, after the Ministry of Finance’s previous proposal to sell shares of Chunghwa Telecom Co (中華電信) to help fund the spending was stalled in the legislature last month.
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