Republic of China - Taiwan

American Journal of Economics and Sociology, The, Dec, 2000 by Alven H.S. Lam

B. Distributing Benefits to the Public

The intergovernmental revenue and expenditure-sharing mechanisms allow limited power to distribute benefits from land sales to the public. Local governments are allowed a portion of land-value increment taxation revenues to be allocated for public housing and other urban and community development projects. The intention was to distribute benefits to needy people such as low income families or disadvantaged groups so as to give them a competitive edge in the society.

In the early 1950s, the benefit distribution mechanism in the land reform program was to offer land to the tillers. When land becomes scarce, distributing land becomes an impossible mission. Distributing tax revenues through providing urban services evolved as a natural solution. However, projects to provide urban services often require strong political commitments as well as effective technical and administrative expertise. As some projects fail, the idea of distributing benefits evaporates. The land-value increment taxation revenues, in these circumstances, had to be reallocated to other municipalities or to be returned to the provincial or central government. As revenues shift to other jurisdictions, the original objective of sharing the benefits tends to be forgotten.

C. Controlling Land Speculation

Controlling land speculation has never received strong endorsement within the current political structure. Neither government nor the private sector has significant interest in implementing this policy. For the private sector, the political power of the land owner tends to overwhelm most of the other powers in society. For the public sector, government agencies that own land are interested in using profits from land development to reduce agency deficits or raise revenues. In either case, regardless of lip service to the principle, the political will to prevent land speculation is disappointingly feeble. Nevertheless, while far from perfect, the land taxes are at least somewhat effective in this regard, especially in contrast with arrangements in most other countries.

IV

Conclusions

THE IMPLEMENTATION OF a program of land and tax reform inspired by Dr. Sun's ideals played a major and indispensable role in building a strong foundation for both economic development and social justice in Taiwan. The population gained equitable access to land and other production utilities. In the 1950s and 1960s, Taiwan was transformed from an impoverished agricultural backwater to a thriving industrial state with one of the world's strongest economies. Income levels increased dramatically, with far less disparity in distribution than in most other countries.

By the mid-1980s (about ten years after the death of Chiang Kaishek), the system had begun to show its imperfection. Rapid urbanization had created a shortage of suitable land supply. Fast-accumulating international trade surpluses stimulated private investment in land, especially by the ruling party and its leading members. Ironically, the Kuomintang, the party founded by Sun and carried on by Chiang, which had enshrined the Three Principles of the People in its platform, became in time the greatest obstacle to their effective operation. Having gained possession of the most valuable locations, the party and its leaders became immensely wealthy. Their profits from land speculation undermined the government's original policy goals by sapping any initiative to rectify weaknesses in the administrative mechanism, and the gap between the very rich, on the one hand, and middle and lower-income citizens, on the other, began to widen.