The Medium-term Impact of Land Value Increment Tax Cut on Local Government Finance─with Analysis of the Financial Relationship Between Central and Local Governments
Date Issued
2011
Date
2011
Author(s)
Jan, Li-Yun
Abstract
This study tries to estimate the medium-term (2005-2009) impact of land value increment tax cut on local government finance through the analysis of local governmental fiscal data in Taiwan. In turn, this study will compare the estimated loss of tax revenue, estimated gain of aid-assistance revenues with the actual subsidies from Ministry of Finance in 2 municipalities and 21 counties.
The results showed that, from 2005 to 2009, due to the land value increment tax cut policy, the yearly average loss of tax revenues suffered by local governments range from 0.15 to 10.9 billion, and the average loss of all local governments was 1.9 billion per year. However, the subsidies from Ministry of Finance were merely 18 million in average per year. Therefore, this study argued that central government should consider more than its short-term impact but also its medium-term and long-term impact on local governments’ finance while it comes to fiscal policy formulation.
On the other hand, while suffering the great loss of tax revenues and self-fundraising resources, local governments had done nothing such as requesting central government for compensation, instead, they asked for a bigger quota of tax for aid distribution and central aid. This indicates that local governments could not get rid of either the high-pressuring restrain of central government or the dependency on the aid policy of central government; hence the impact of single unfunded mandate was ignored. After all, the tax for aid distribution and central aid remains to be the most important fiscal resource to local governments. This study proofs that the fiscal structure which is called "Central government centralize state power and local governments dependent on central government"(蔡吉源、林建次，2005) still exists in Taiwan.
Subjects
land value increment tax
fiscal relationship between central and local governments
unfunded mandates
Type
thesis
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