Driving Forces of Policy Change: A Case Study of Taiwan’s Tax Incentives in the Industrial Policy
Date Issued
2012
Date
2012
Author(s)
Lu, Jiun-Wei
Abstract
While some researches point out that the economic models of government intervention in East Asian countries have transformed into the market-oriented one in the era of democratization and economic liberalization, others argue that such evolution merely reflect these countries’ adaptation to their new political and Economic conditions. This theoretical debate has great implications for understanding the evolution of Taiwan’s developmental state since the opening of economic liberalization in the mid-1980s and democratization in the 1990s.
This study attempts to analyze two questions. 1) Whether the changes in Taiwan’s developmental state model reflected a process of transformation or adaptation? 2) If the model did transform, what were the driving forces of it? What were the effects of democratization and globalization on the transformation of Taiwan’s developmental state?
To answer the first question, this research examines the influences of tax incentives and exemptions on Taiwan’s economic changes. It especially focuses on the tax-expenditure clauses in the “Statute for the Encouragement of Investment”, “Statute for Upgrading Industry” and “Statute for Industrial Innovation,” which are the most primary industrial policy tools of the government. They symbolize the main characters of Taiwan’s developmental state.
This analysis finds that the items of tax policy sorted by industries which implicates the higher degree of government intervention have gradually decreased in “Statute for the Encouragement of Investment”, “Statute for Upgrading Industry” and “Statute for Industrial Innovation”. The phase-out of tax policy sorted by industries refers to the decline of the government intervention since the mid-1980s.
In addressing the second research question, I utilize a model of “discourse salience”, which is inspired by the researches of policy discourse competition and agenda-setting power, to analyze the driving forces of the changes in the tax policy for industrial development. The research result suggests that the possibility and degree of policy changes are positively related to the complexity and politicalization of the argument about policy issues.
From the late-1980s to the early 1990s, the industrial policy network dominated by the bureaucratic technocrats in MOEA was the predominant actor of the changes in the tax policy for industrial development, which signified the characters of the developmental state.
Bureaucratic competition was drastic as a result of the integration of corporate and individual income tax in the late-1990s, which forced President Lee Teng-hui (李登輝) to personally intervene in the dispute of the tax policy for industrial development. And it showed that the developmental state had to adapt when confronted the critics even though it got the endorsement of President Lee.
The tax policy for industrial development faced both challenges from politics and globalization beyond 2000, which contributed to the termination of the tax-expenditure clauses in “Statute for Industrial Innovation”. This implies that the developmental state has to abate the government intervention comprehensively and substantially in the context of political struggles and economic globalization. Nevertheless, some clues show that Taiwan is not far ahead of the developmental state; in other words, Taiwan’s developmental state is still in adaption.
Subjects
developmental state
tax policy for industrial development
policy change
discourse salience
Type
thesis
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