It is always important for a government to make the source of money as stable as possible in order to carry out any public construction or to improve the living condition of the people. People are only able to balance their income and expenses through the operation of a fair financial system and it is only possible to maintain a harmonious social order through the use of such a system.

In 1912, the Ministry of Finance was established under the Provisional Government of the Republic of China, and several reforms were initiated; but it was not possible to effect any substantive changes at that time due to political uncertainty. At the end of the Beiyang Government, China’s customs and the salt tax were still mostly under the control of foreign administrations and under such circumstances it was impossible for the Ministry of Finance to carry out any of its policies.

When the National Government was formed in 1925, the Ministry of Finance implemented new reforms including the abandonment of the old ‘tael’ and its replacement with the ‘yuan’ and also the abolition of the ‘internal tax system’ which had created trade barriers between different provinces, counties, and even cities of China. The National Government also collected tax on goods, land, and business and personal incomes by means of a unified new system. The biggest accomplishment of the Nanking Government was the adoption of an autonomous tariff and the issuance of legal tender. With these steps, China began to have a modern financial system.

In 1937, the War of Resistance against Japanese Aggression began. This necessitated that China develop a wartime financial system whereby all financial efforts went towards supporting the military. Although the monopoly system was launched, it was restricted in its ability to raise finances. China faced an inflation crisis before the end of the war and the issuance of the Gold Yuan by the Central Bank after the adoption of the constitution was unable to solve the problem.

The two main purposes for the Ministry of Finance after the withdrawal of the National Government to Taiwan were to provide support to the military and to maintain the stability of the financial system. After the situation had become more stable in Taiwan, the Ministry of Finance began to launch its new financial reform. The government launched the ‘The Nineteen-Point Financial and Economic Reform Program’ in 1960 with a focus on economic development, the budget, finance, foreign exchange, and trade.

The Ministry of Finance undertook further financial reforms during the late 1960s including the ‘Savings Movement’. The improvement in taxation system and tax administration, promote capital financing, and relaxation of foreign exchange restrictions. At the same time, the ‘Income Tax Law,’ ‘The Act for the Encouragement of Investment,’ ‘The Tariff Law,’ and ‘The Law of Inheritance and Gifts’ were also enacted. With the computerization of tax data, the Ministry also set up the Financial Data Center, financial tax auditing special unit, National Treasury Centralization Disbursement System and the Credit Guarantee Fund System for medium and small industries. In addition, the Ministry of Finance also provided Taiwan with the basic funding for the use in the ‘Nine-Year Compulsory Education Policy’ and the ‘Ten Major Construction Projects’ by borrowing from international institutions with syndicated loans and by issuing government bonds.

Beginning in the 1970s, Taiwan was transformed rapidly into an export-oriented economy. The Ministry of Finance then started the liberalization of the financial system, and created the money market and foreign exchange market. A Tax Reform Commission was established in 1987 to deal with the reform of the administration of taxes and the tax system, including the enlargement of the tax base and the reduction of tax evasion, the revisions of the tariff system, sales tax, and income tax. The issues of the profits of state-owned enterprises and the related tax problems of the monopoly system were also raised for discussion.

The Ministry of Finance launched further reforms after the end of the Cold War to attain the goal of creating a liberalized and globalized market in Taiwan so as to enable the economy of Taiwan to become better-connected with other economies and for the Ministry of Finance to reach the goal of balancing the revenues and expenditures of the government with the creation of a more stable, fair, and diversified financial system.