Taipei: The government’s finances would be hurt by a recent amendment pushed through by opposition parties that increases public funds allocated to local governments, President Lai Ching-te said Monday as the stalemate over the issue persisted. Premier Cho Jung-tai has refused to sign off on the law and Lai has not formally put it into effect, marking the first time a president of the Republic of China (Taiwan’s formal name) has not publicly enacted a bill passed by the Legislative Yuan. The two have argued that the amendment violates the Constitution and would harm Taiwan’s public finances.
According to Focus Taiwan, in a pre-recorded video posted Monday night, Lai stated that as president, he is duty-bound to safeguard Taiwan’s democratic system according to the Constitution, and to ensure the survival and development of every citizen. Lai explained the risks facing the nation under the current constitutional circumstances after meeting with Premier Cho and Examination Yuan President Chou Hung-hsien to discuss the issue.
The amendment, passed in November, proposes that local governments receive more funding, potentially stymieing major central government policies. Lai indicated it would force the central government to borrow NT$563.8 billion (US$17.9 billion) during the 2026 fiscal year, exceeding the statutory deficit ceiling and violating the Public Debt Act. Lai argued that the legislation would lead to excessive borrowing by the central government each year, crippling its finances.
Lai’s NT$563.8 billion figure, however, combines different budgetary components. The amendment mandates at least the same subsidy allocation to local governments in 2026 as in 2025, approximately NT$545.5 billion. Yet, Lai’s government only allocated NT$280.9 billion for local government subsidies in its 2026 budget proposal, falling NT$264.6 billion short of the requirement. The remaining NT$299.2 billion in Lai’s figure pertains to the already proposed 2026 general budget deficit and is not directly related to the allocation issue. This borrowing would exceed the statutory deficit ceiling by about NT$109 billion, defined as 15 percent of the proposed 2026 total budget of NT$3.035 trillion.
The situation reached a critical point Monday when Lai did not promulgate the amendment by the statutory deadline, after Cho refused to countersign it due to “major constitutional violations,” raising concerns of a constitutional crisis. In his video message, Lai also highlighted the fiscal consequences of another amendment passed by lawmakers Friday, which would partially reverse pension cuts for civil servants and public school teachers and halt planned reductions through 2029.
Lai warned that this measure would offset part of the pension reforms introduced by the former Democratic Progressive Party administration in 2018, resulting in a NT$700 billion shortfall in the public service pension fund. He recalled former President Ma Ying-jeou’s 2013 warning that without reform, the pension system would face dire consequences. Lai cautioned that the current legislative actions are once again pushing the system towards financial instability.
The partisan divide between Lai and the opposition-controlled Legislature was further evident in his critique of other bills sponsored by opposition Kuomintang (KMT) caucus members, which he perceives as an “abuse” of legislative power. Lai urged sponsors to withdraw these bills, suggesting that they send a “dangerous” signal that opposition lawmakers can exploit their power to pass bills that infringe on social justice and democracy.