Taipei: Finance Minister Chuang Tsui-yun announced that the government will strictly adhere to fiscal discipline in anticipation of a future revenue shortfall due to demographic changes, including an aging population and declining birth rates. Chuang made this commitment while addressing the Legislative Yuan's finance committee, emphasizing the need for stringent control over public debt to enhance fiscal resilience.
According to Focus Taiwan, Chuang's remarks were in response to a Ministry of Finance (MOF) report, which predicts that the central government will begin experiencing revenue shortfalls starting in 2041. The report, prepared by National Chengchi University between July 2024 and November 2025, highlights how Taiwan's shifting population dynamics will influence government tax revenue.
The projections indicate a worsening scenario each year, with an extreme situation potentially leading to a government revenue shortfall of NT$11.006 billion (US$349 million) in 2041. Analyzing 2023 population data, the report estimates that tax revenue will decrease from NT$2.9 trillion in 2024 to NT$2.5397 trillion by 2041, while government expenditures are expected to decline from NT$2.63 trillion to NT$2.5507 trillion.
The shortfall is expected to grow significantly, reaching approximately NT$314.12 billion in 2070. By then, Taiwan's total population is forecast to decrease by about 8.44 million, with the working-age population dropping by 56.9 percent from 2024 levels. Concurrently, the population aged 65 or older is projected to increase by 55.2 percent to 6.97 million, and the number of children aged 14 and under is expected to fall by 62.6 percent to 1.03 million.
The report suggests that these demographic changes, rather than a decline in economic growth momentum, will primarily drive the fall in revenue, impacting the government's fiscal health due to a shrinking tax-paying population. Additionally, welfare and pension spending are projected to rise, while education spending will decline as birth rates fall.
To mitigate fiscal risks associated with an aging population, the report recommends that the government consider adjusting the tax system to reduce reliance on income tax, expand property and consumption taxes, and explore introducing environmental and "sin" taxes on carbon, tobacco, and sugary drinks. Reevaluating spending structures to prevent welfare, pensions, education, and health spending from crowding out other government expenditures is also suggested.
Chuang clarified that the research serves as a policy reference and does not reflect the MOF's official stance. However, the government has already implemented policies to address the declining population. Furthermore, Chuang noted that the current government debt stands at 22.7 percent of GDP, significantly below the legal ceiling of 40.6 percent.