The Rundown: Tax Revenue Spike, CPI Increase, and AA Fitch Rating

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MOF Reports NT$2 trillion in Tax Revenue for First Eight Months

The Ministry of Finance (MOF) on September 9 reported that net tax revenue for August totaled NT$132.4 billion (US$4.8 billion), 3.8% greater than the same month last year. Net tax revenue for the first eight months of 2021 was NT$1.9 trillion (US$68.7 billion), an increase of 23.5% compared to last year and a record high for that period.

The surge in Taiwan’s stock market last month is a major factor in the increased tax revenue. In August, net securities transaction tax and commodity tax revenue increased by NT$9.9 billion and NT$1 billion, respectively, compared to the same month last year, accounting for substantial growth. On the other hand, net business tax and comprehensive individual income tax revenue fell NT$2.9 billion and NT$2.6 billion, respectively, from August 2020.

MOF Department of Statistics Deputy Director Chen Yu-feng said that in addition to total tax revenue, yields from the enterprise income tax, business tax, securities transaction tax, customs duties, inheritance tax, housing tax, and vehicle license tax for the first eight months of 2021 all reached historic highs. However, amusement tax revenue in the first eight months only reached NT$800 million, a decrease of 24.8% from the same period in 2020, due to the impact of COVID-19.

CPI Rises Again in August

The Directorate General of Budget, Accounting and Statistics (DGBAS) last week reported that the Consumer Price Index (CPI) in August rose by 2.36% from the same month in 2020, the third increase of more 2% this year. Food prices, which increased by 3.84% and accounted for 0.94% of the total price index, were the main contributor to the large growth in consumer prices.

The DGBAS noted that price of vegetables rose significantly in August due to recent heavy rainfall, which, coupled with a relatively low comparison base for fuel prices during the same period last year, resulted in the significant year-on-year rise in the CPI last month.

The DGBAS expects that the annual growth rate of the CPI will again exceed 2% in the third quarter, but will drop back down to below 2% in Q4, avoiding domestic inflationary pressure. 

Taiwan Receives Improved Credit Ratings

Fitch Ratings announced on September 10 that it will upgrade Taiwan’s long-term foreign currency Issuer Default Rating (IDR) from AA- to AA, with the outlook deemed “stable.” This marks the first improvement in Taiwan’s rating since 2016 and the first AA rating given to Taiwan in 20 years.

The most recent Fitch report on Taiwan raised some eyebrows, however, as it referred to the island as “Taiwan, China,” drawing a rebuke from the government.

The world’s three major ratings agencies – S&P Global, Fitch Ratings, and Moody’s – for the first time this year all raised Taiwan’s sovereign credit rating.

Fitch forecasts a 6% expansion in Taiwan’s economy in 2021, much higher than the median 4.6% for other nations of the same rating and nearly double the 3.1% economic growth Taiwan experienced last year.

This edition was translated from the original Chinese by Grace Faerber.