Government criticizes lawmakers' draft amendments to funding law

Taipei, Nov. 6 (CNA) Two central government departments on Wednesday criticized proposed amendments to an act relating to the allocation of funding between central and local governments that completed an initial review in the Legislature earlier in the day.

The ministries claimed that the amendments create a "fiscal imbalance" that would "severely impact the development of the nation" if passed into law.

"Today's draft amendment to the Act Governing the Allocation of Government Revenues and Expenditures requires the central government to relinquish financial resources, but also does not allow for the central government's general funding to local governments to be reduced," said Tsai Hung-kun (蔡鴻坤), deputy head of the Directorate-General of Budget, Accounting and Statistics (DGBAS).

"This will impact the country," he added.

The 22 proposed amendments to the Act Governing the Allocation of Government Revenues and Expenditures completed the initial committee review process with support from the opposition Kuomintang (KMT) and Taiwan People's Party (TPP), paving the way for them to be discussed in the Legislative Yuan in the coming months.

If passed by the Legislature, the draft amendments to the act, which regulates the distribution of fiscal resources between central and local authorities, would be the first change to the law in more than 25 years.

The current dispensation of government finances favors the central government that is currently led by the Democratic Progressive Party (DPP), with 75 percent allocated to the center compared with 25 percent for local governments.

After the proposal cleared the committee stage earlier in the day, Tsai said the proposed amendments would require the central government to relinquish NT$661.2 billion (US$20.43 billion) -- nearly half of the total financial resources at its disposal.

This number was arrived at based on the Legislative Yuan's calculations for next year's NT$3.1325 trillion general budget, which would provide the central government with NT$1.3181 trillion after mandatory legal deductions of NT$1.8144 trillion are accounted for.

Tsai emphasized that -- given the drastic projected shortfall in central government finances that the draft amendments, if passed into law, would cause -- local governments would need to "re-align" their responsibilities in accordance with their increased resources by taking on the fiscal burden of funding measures such as health and labor insurance.

The official also said it was "unreasonable" for local governments to continue receiving the same level of subsidies from the central government even after central government funding is reduced, as proposed by the opposition lawmakers' draft amendments to the act.

The Ministry of Finance (MOF) issued a written statement that echoed the DGBAS's concerns about the creation of a "fiscal imbalance" if the draft amendments become law.

"In recent years, in addition to central allocation of tax revenue [to local governments], the central government has provided general and project-based subsidies to support local [government] finances," the MOF said.

From 2014 to 2025, these subsidies will have more than doubled from NT$548.6 billion to NT$1.151 trillion, the ministry said.

If the central government is required to release NT$661.2 billion along with an additional NT$541.2 billion for general and project-based subsidies, as proposed by the opposition lawmakers, then this would "severely impact the central government's ability to govern."

The finance ministry also expressed concern about "the lack of substantial discussion," referring to the fact that the Finance Committee led by KMT lawmaker Chen Yu-jen (陳玉珍) sent the draft amendments to the next stage of the legislative process just three minutes into the meeting.

According to standard procedure in the Legislature, now the proposed amendments have completed the initial committee review stage, they will be discussed in inter-party caucus negotiations before being openly reviewed at a plenary session of the Legislature and potentially be passed into law.