Mon, Dec 27, 2010 page1

• Megacities face finance issues: experts

  FISCAL FIASCO: Academics urged the special municipalities to restructure their financial systems rather than increase revenue sources to avoid a cash crisis

  • By Ko Shu-ling / Staff Reporter
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  Taipei City and the four special municipalities that came into being on Saturday could turn into a disaster for the central and local governments if underlying financial problems are not properly addressed, experts told a forum on the financial aspects of the five megacities yesterday.

  Peng Pai-hsien (彭百顯), a professor of finance at Kainan University, told a panel organized by the Taiwan Brain Trust think tank in Taipei that the five special municipalities face an immediate shortfall of NT$718.5 billion (US$24.27 billion) — which would climb to NT$803.4 billion if potential debt were counted — while the central government was faring no better, with a potential debt of NT$21 trillion.

  “Mayors of the five special municipalities will no doubt have bigger cities to govern, more resources at their disposal, more manpower to use and better benefits, but they also face larger debts,” Peng said.

  “The change of the city structure is bound to compound the financial situation of the state and local governments, making the well-off cities better-off and badly-off counties and cities worse-off,” Peng said.

  If the legislature passes revisions to the Act Governing the Allocation of Government Revenues and Expenditures (財政收支劃分法) proposed by the Ministry of Finance, Peng said, the state treasury would allocate NT$98.2 billion to local governments, of which 62 percent, or NT$60.7 billion, would go to the five special municipalities. However, such amounts still cannot meet the needs of the five megacities, he said.

  The Executive Yuan has also sought amendments to the Public Debt Act (公債法), which Peng said would allow local governments to inflate their budgets by borrowing too much.

  Peng urged each administration to complete sustainable planning of administrative zoning during their mayors’ first four-year term. To avoid a potential financial crisis, he proposed the administrations put more emphasis on restructuring the financial system than increasing the source of revenues.

  Taiwan Brain Trust president Lo Chih-cheng (羅致政) said the central government must take advantage of this opportunity to decentralize more money and power to local governments.

  Aside from the main direction of the state economy and domestic affairs, Lo said the main duties of the central government should be national defense, foreign affairs and cross-strait relations. If the central government wishes to play a more dominant role, it should focus on providing better services.

  To reach that goal, Lo said it should consider whether it is necessary to raise taxes, taking into consideration the current financial situation.

  Su Jain-rong (蘇建榮), a professor of finance at National Taipei University, said that unless the central government raised taxes or distributed most of its tax revenues to local governments, it was unlikely to effectively resolve the financial problems of the five special municipalities, regardless of the amendments made to the Act Governing the Allocation of Government Revenues and Expenditures.

  While the legislature is still revising the bill, Su said it should consider the differences between local governments in terms of population, economy and governance. He also urged the executive branch to let local governments have a say in the usage of the tax redistribution fund if parts of the business tax were added to the fund.

  To stabilize local governments’ sources of income, the central government could establish a “rainy day fund,” he said.

  He also proposed the formation of a disbursement committee of experts and local government representatives who would decide how the tax distribution fund is dispensed.
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