Taiwan to observe fiscal discipline on expected revenue shortfall: MOF

Taipei, June 15 (CNA) Finance Minister Chuang Tsui-yun (莊翠雲) said Monday that the government will closely adhere to fiscal discipline as Taiwan looks to a future with an increasing revenue shortfall suffered by the government caused by an aging population and falling births.

Speaking at the Legislative Yuan's finance committee, Chuang pledged to continue exercising strict control over public debt to strengthen fiscal resilience.

Chuang's comments came in response to a Ministry of Finance (MOF) report forecasting that the central government will face revenue shortfalls beginning in 2041.

The report, commissioned by the MOF and conducted by National Chengchi University between July 2024 and November 2025, found that Taiwan's changing population structure will affect government tax revenue.

The situation is projected to worsen each year and, under an extreme scenario, could result in a government revenue shortfall of NT$11.006 billion (US$349 million) in 2041, it said.

The report, which crunched population data in 2023, estimated that government tax revenue will fall from NT$2.9 trillion in 2024 to NT$2.5397 trillion in 2041, while government expenditure will decline from NT$2.63 trillion to NT$2.5507 trillion.

The report said the shortfall is expected to grow to about NT$314.12 billion in 2070, when Taiwan's total population is forecast to fall by about 8.44 million with the working population aged 15-64 dropping to 6.97 million, down 56.9 percent from 2024.

In 2070, the number of people aged 65 or older is estimated to rise by 55.2 percent to 6.97 million with the number of children aged 14 and under set to fall 62.6 percent to 1.03 million, the report said.

As a result, government tax revenue is likely to fall to NT$1.6725 trillion in 2070, with spending expected to dip to NT$1.9866 trillion, from 2024, which will increase the revenue shortfall to NT$314.12 billion, according to the report.

The report said the fall in revenue will largely come from changing population structure rather than a drop in economic growth momentum, adding that the government's fiscal health will be affected by the shrinking tax paying population.

In addition, welfare and pension spending by the central government are projected to rise in the long term, while education spending will decline with fewer children being born, the report said.

To reduce fiscal risks amid an aging population, the government should come up with effective measures such as adjusting the tax system to reduce reliance on income tax, expanding property and consumption taxes, and consider introducing environmental and "sin" taxes targeting carbon tobacco, and sugary drinks.

The report also suggested the government should reevaluate spending structures so that growth in welfare, pensions, education, and health spending does not crowd out other government expenditure.

Chuang said the research is intended to serve as a policy reference but does not represent the MOF's official position, adding that the government has come up with polices to address the falling population.

In addition, Chuang noted that government debt as a proportion of GDP currently stands at 22.7 percent, well below the 40.6 percent ceiling required by law.