The Legislative Yuan of the Republic of China passed the final reading of the amendment draft of the “Budget Act” recently. According to the Director of the Directorate General of Budget, Accounting and Statistics of the Executive Yuan, this amendment will have various impacts, including defense funding, subsidizing labor insurance funds, financial assistance for health insurance, expanding central rent subsidies, and establishing special housing projects.
In a press conference held by the Executive Yuan on the explanation of the final version of the “Budget Act” passed by the Legislative Yuan, Minister of Finance, Chuang Tsui-yun, expressed concerns about the significant increase in central fund allocation after the amendment on the 20th. It poses a threat to the financial stability of the central government, limiting its ability to balance regional disparities and promote major construction projects. The revised allocation criteria, focusing more on population and business turnover indicators, may widen the urban-rural gap.
The Director of the Directorate General of Budget, Accounting and Statistics of the Republic of China stated that the central government would reduce its annual regular income by NT$375.3 billion (approximately $12 billion USD) following the amendment. With a substantial increase in local revenue sources, the demand for guaranteeing general subsidies is deemed unreasonable. Based on the principle of fund transfer with responsibilities, the central government should transfer back the business previously held by provincial governments to local authorities, while future departmental project subsidies will prioritize returning to local levels or raising self-raised fund ratios accordingly.
The spokesperson of the Executive Yuan, Li Hui-zhi, noted persistent calls for revising the Budget Act in recent years. While the government maintains an open attitude towards revisions, consensus-building takes time. The Ministry of Finance continues to communicate with local governments in hopes of gathering feedback. However, the opposition party forced the completion of the final reading before reaching consensus. Therefore, the Executive Yuan must responsibly remind of the issues that the passed Budget Act version may cause and the policies and plans that will be delayed or interrupted.
The amendment to the Budget Act necessitates the central government to further release NT$375.3 billion in funds annually, accounting for 9% of total revenue and 6% of general subsidies totaling NT$250.1 billion. Retaining provincial business at the central government level is considered highly inappropriate and should incorporate responsibilities in the evaluation. Otherwise, it may lead to overspending by local governments to digest budgets, triggering unlawful social welfare expansion and ill-assessed construction projects, undermining local fiscal discipline.
After the amendment, local revenue sources are expected to increase significantly, with some counties and cities receiving tax allocations and general subsidies from the central government exceeding the current fiscal year’s budget scale. Adhering to the principle of fund transfer with responsibilities, tasks previously handled by provincial governments, such as elderly farmers’ subsidies, labor health insurance fees, provincial schools, and hospitals, should also be transferred back to local authorities.
Following the amendment, the central government will face a reduction of NT$375.3 billion in regular annual income, compelling a proportional cut in budget expenditures. Hence, the mandatory non-legally bound expenses, amounting to NT$1.3181 trillion, must be reduced by approximately 28%. Affected projects include defense spending, labor insurance fund allocations, central rent subsidy expansions, special housing initiatives, population decline countermeasures, security-related spending, health insurance financial assistance, and healthcare service quality enhancement.
Furthermore, public construction funds totaling NT$264.4 billion, and technology development funds of NT$146.6 billion, will be affected. Projects impacted include provincial road improvements, urban transportation systems within residential areas, sustainable pedestrian safety enhancements, metro constructions, elevated railway infrastructure developments, cross-domain integrated sustainable agricultural water resource management, holistic mountain disaster prevention, and sewage treatment constructions.
In aiming to balance regional development across Taiwan, the central government will implement a “Balanced Taiwan Major Infrastructure Plan”, enhancing financial support for relevant public construction projects, planning comprehensively, and assisting local governments in advancing significant infrastructural developments such as railways, metros, highways, water resource utilization, tourism, and agriculture. Continued substantial resource allocation is essential in subsequent years; otherwise, it could greatly impede Taiwan’s future balanced development.
With the amendment of the Budget Act increasing local revenue sources and fiscal capacity, Director Chen emphasized that subsidies for various departmental project plans such as childcare allowances and sewage pipeline constructions will be reviewed to prioritize returning to local authorities or raising self-raised fund ratios by the central government.