The difference between the government’s GDP projection and the nation’s real economic performance accounts for a tax surplus from last year, finance officials told lawmakers yesterday.
The comments came after people questioned the legitimacy of tax surpluses from the past two years, as the government has said it would use part of a NT$450 billion (US$14.74 billion) tax surplus to distribute cash payments of NT$6,000 next month.
Directorate-General of Budget, Accounting and Statistics (DGBAS) Minister Chu Tzer-ming (朱澤民) said that the agency in August 2020 forecast GDP growth of 3.92 percent for 2021, but the real growth approached 6.5 percent, thanks to strong demand for electronic devices used in remote work and education.
Photo: CNA
Manufacturing sectors and individuals gained much higher incomes than expected, which inflated state coffers, Chu said.
DGBAS officials normally prepare fiscal budgets up to two years in advance based on data from recent years, and were therefore unable to account for the economic effects of the COVID-19 pandemic and the Russian invasion of Ukraine.
In 2021, securities and property transfers also outperformed government predictions by a wide margin and boosted related taxes, Chu said.
Major firms posted robust earnings in the first half of last year, but saw acute inventory corrections in the final quarter, as drastic interest rate hikes by global central banks hurt demand for goods and services, he said.
This resulted in another year of massive tax surpluses, helped by a quick recovery in private consumption after COVID-19 restrictions were relaxed and the nation reopened its borders, the DGBAS said.
When factoring in COVID-19 spending, the government incurred a small deficit last year, Chu said.
Acting Minister of Finance Frank Juan (阮清華) said the two-year time lag plays an important part in creating tax surpluses or shortfalls.
GDP growth over the past two years deviated from long-term averages, making budget projections difficult, Juan said.
Former minister of finance Su Jain-rong (蘇建榮) told a tax forum yesterday that it is not accurate to say tax surpluses are policy mistakes, as some officials have said.
Tax surpluses stem from the nation’s stronger-than-expected economic performance, said Su, who has resumed his position as a professor of finance at National Taipei University.
Su said he had reservations about the cash distribution plan, saying that the government should first seek to pay off its debt and enhance its financial resilience to avoid fiscal deficits or financial shocks.
The government has accumulated huge debts, which could become burdens on future generations, Su said.
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