The China Post staff
A high-profile Cabinet meeting yesterday agreed on an eight-point package aimed at rejuvenating the nation’s economy, under which the government will scrap altogether the current 2 percent bank business tax.
The summit also decided that the government will not hike tax, and promised a more friendly investment environment for both domestic and foreign investors. To pull the nation’s struggling non-high-tech industries out of their liquidity difficulties, the government also decided to launch a NT$450 billion special loan package.
The highly anticipated summit, attended by top government officials and business heavyweights, was held yesterday afternoon at the Presidential Office.
The meeting included Premier Chang Chun-hsiung, Vice Premier Lai In-jaw, the nation’s top statistician Lin Chuan, top economic planner Chen Po-chih, Finance Minister Yen Ching-chang, Economics Minister Lin Hsin-yi, Central Bank of China Governor Perng Fai-nan, Council of Labor Affairs head Chen Chu, and many business heavyweights.
President Chen Shui-bian, in a speech preceding the meeting, vowed that the government will not hike taxes during its four-year term.
The president also pledged “a stable investment environment that will face no shortage of funds, talent, water, electricity and land.”
Chen also said the political parties, both opposition and ruling, should work together as “political instability will wear out the nation’s competitiveness and eventually Taiwan will be no longer able to face tough global challenges.” “I have to repeat here that everybody can oppose or criticize me. But I truly hope that leaders of the political parties can sit down and work on conciliation.” Premier Chang told a press conference after the meeting that banks will be required to roll over by six months their loans to non-electronics industries that have been paying interest regularly but have a shortage of funds. The loan extension will allow companies originally required to repay their principal by the middle of April to defer their repayment to as late as the middle of October.
According to Chang, scrapping the bank business tax is aimed at helping banks write off their growing bad loans earlier and to help traditional sectors raise funds more easily.
Business taxes for banks have already been cut to two percent from the original five percent in June 1999.
The tax cut is expected to lead to a tax shortfall estimated at around NT$30 billion, Chang said, adding however that the Ministry of Finance will seek other alternative ways to make up for the shortfall.
An NT$450 billion special loan package will be launched to help non-high-tech industries out of their current liquidity difficulties, according to Chang. The Central Bank of China will coordinate banks to arrange the program, which will provide medium to long term lending to traditional industries at interest rates of between 6.5-7.0 percent. The loan package will have a maximum period of seven years. Small and medium-sized companies that do not have sufficient collateral to back their loans can apply for credit guarantees from the Cabinet’s credit guarantee fund.
The summit also adopted President Chen’s promise to not hike taxes. The decision, indeed, has raised concerns about a further deterioration in the nation’s finances.