Written by YouHao Lai and Gahon Chiang.
Image credit: 立法院.
This year, Taiwan’s Lunar New Year has been anything but quiet. Instead of simply gathering with family and celebrating traditions, citizens across the country have taken to the streets, urging passersby to sign recall petitions against lawmakers. So far, the vast majority of these efforts have targeted legislators from the Kuomintang (KMT), the largest party in the Legislative Yuan. With more than 30 KMT lawmakers already in the second phase of the recall process, organisers are racing to bring the issue to a vote on Taiwan’s national referendum day this August.
The nationwide recall movement sweeping Taiwan did not emerge out of nowhere. Its spark? A fierce battle over budget cuts at the end of January. Despite strong opposition from the ruling Democratic Progressive Party (DPP), the KMT and its ally, the Taiwan People’s Party (TPP), leveraged their legislative majority to push through the largest budget reduction in Taiwan’s history. By slashing and freezing up to NT$207.5 billion from the Executive Yuan’s original proposal, the KMT-TPP majority raised alarms over the rule of law, government operations, and citizens’ daily lives in Taiwan.
With these unprecedented budget cuts at the centre of public debate, this article explores the procedural and substantive controversies they have triggered, their impact on Taiwan’s government and national security, and what might come next.
The Procedural and Substantive Controversies of Taiwan’s Budget Cuts
Taiwan’s budget review process this year has been plagued by disorder. Under Taiwanese law, the annual budget should have been approved by November 30, 2024, following months of careful discussion. However, delays pushed the process into November 2024, with the most critical reviews crammed into just two days—January 20–21, 2025. Making matters worse, the legislative majority rushed through a flood of budget-cut proposals, many introduced or amended at the very last minute before voting. The result? Errors piled up—incorrect figures, misidentified government agencies, and even duplicate cuts. This hasty, chaotic process not only undermined the deliberative spirit of legislative review but has also left lawmakers still debating the exact scale of the cuts weeks later.
Furthermore, the budget cuts are not only unprecedented in scale but also deeply flawed in substance. While the exact extent of the reductions is disputed—the DPP claims that 34% of government spending has been cut or frozen, while the KMT insists the figure is only 6.63%—even by the KMT’s estimate, this marks the largest budget reduction in over two decades. In fact, it is three times greater than the previous record cut of 2.27% in 2006.
But the real problem isn’t just the numbers—it’s the impact. Many of the slashed funds fall under operational expenses, with no flexibility to redirect funds from other budget categories, such as salaries or equipment, to cover the gap. Lien Hsien-ming, President of the Chung-Hua Institution for Economic Research, likens the situation to running a transport service without fuel. Without operational funds, even fully staffed and well-equipped agencies are left stranded. To make things worse, the legislature has ordered the executive to identify an additional NT$63.8 billion in cuts without specifying where they should come from. In doing so, the legislative majority appears more focused on cutting for the sake of cutting rather than crafting a responsible budget. This lack of accountability undermines governance and threatens the core principles of constitutional democracy.
Undermining Governance: How Budget Cuts Are Crippling Taiwan’s Government Functions
The budget cuts are also disrupting core government functions and policy implementation. Numerous agencies are now struggling to operate, with some on the brink of paralysis. The Control Yuan, Taiwan’s highest ombudsman and a constitutional body parallel to the Legislative Yuan has seen 96% of its operational budget slashed, while the Office of the President faces a 73% budget freeze. The Ill-gotten Party Assets Settlement Committee, which investigates assets accumulated by the KMT during the authoritarian era, has lost 90% of its funding.
In fact, the impact extends beyond government agencies. The NT$100 billion subsidy for Taiwan Power Company, meant to shield consumers from soaring energy prices following the Russia-Ukraine war, has been entirely eliminated. Taiwan’s Public Television Service (PTS) narrowly escaped complete defunding after widespread public backlash, yet still suffered a NT$23 million cut and a 25% budget freeze. Despite repeated court rulings confirming that obstructing constitutional bodies undermines the separation of powers, the legislative majority has persisted with potentially unconstitutional budget cuts—jeopardising the very institutions and government functions that uphold Taiwan’s democracy.
Weakening Defenses: National Security Concerns Over Deep Budget Cuts
However, the most urgent concern about these budget cuts is their harmful impact on Taiwan’s efforts to strengthen its self-defence. Over the past eight years, Taiwan has steadily increased its defence budget in response to escalating regional threats. Under Tsai Ing-wen’s administration, national defence spending grew from NT$365.8 billion in 2016 to NT$606.8 billion in 2024, underscoring Taiwan’s commitment to strengthening its military capabilities. For the 2025 fiscal year, the Cabinet proposed an additional increase to NT$647 billion, amounting to 2.45% of GDP—an approximately 80% rise over the past decade.
Yet, the opposition-led Legislature had implemented NT$8.4 billion in budget cuts and frozen an additional NT$89.9 billion, affecting 20.7% of the proposed defence budget—a drastic departure from previous years, when budget adjustments rarely exceeded 2%.
These budget cuts and freezes jeopardise Taiwan’s ability to carry out critical security projects. The Indigenous Defense Submarine (IDS) programme, a cornerstone of Taiwan’s asymmetric defence strategy, now risks delays in obtaining export licenses from foreign governments, reduced willingness from partnering contractors to collaborate, and the loss of professional talent in shipbuilding due to 50% of its budget being frozen. As a key deterrent against China’s maritime coercion, any disruption to this programme could weaken Taiwan’s defence posture and increase its vulnerability.
The budget cuts also threaten the Aerospace Park in southern Taiwan, a project aimed at establishing a secure, China-free drone supply chain while attracting private-sector investment in dual-use drone technology. Fifty per cent of its budget has been frozen due to the opposition party’s claim that the Ministry of National Defense (MND) lacks the expertise to manage an industrial park. However, given the park’s critical role in national defence, it is not always feasible for the Ministry of Economic Affairs (MOEA) to take the lead on this initiative. Halting its progress not only weakens Taiwan’s defence preparedness but also undermines its position as a regional technology leader. Moreover, delays in infrastructure expansion and talent cultivation could drive key industries to relocate abroad, ultimately diminishing Taiwan’s competitiveness in the global drone market.
The ramifications of these budget cuts extend beyond conventional military capabilities. Between January and February 2025, Taiwan experienced four submarine cable disruptions—three domestic and one international. These were not isolated incidents but part of a persistent and troubling pattern. In 2023 alone, undersea cables connecting Taiwan and the Matsu Islands—Taiwanese territories near China’s southeast coast—were severed 12 times, with repair costs reaching NT$100 million, according to Chunghwa Telecom. These recurring disruptions impose significant economic and security burdens. Moreover, they align with Beijing’s broader strategy to undermine Taiwan’s connectivity, test its resilience, and gauge international responses—all without resorting to open conflict.
Despite these persistent threats, Taiwan’s budget for securing its communication networks has faced significant reductions. The Ministry of Digital Affairs initially allocated NT$530 million for bolstering Taiwan’s digital infrastructure, yet this amount has been slashed to NT$300 million—a 56% decrease. These cuts hamper essential projects, including undersea cable repairs, maintenance, and the deployment of low-earth orbit satellites, all of which are critical for maintaining secure and resilient communications.
Last but not least, reductions in defence and resilience spending could undermine Taiwan’s role in international security cooperation. The United States and Japan—Taiwan’s key security partners—closely monitor its defence investments as an indicator of strategic commitment. Cutting defence funding risks eroding international confidence in Taiwan’s resolve to defend itself, potentially straining critical partnerships at a time when regional security cooperation is more vital than ever.
Defending Democracy and Security: A Defining Moment for Taiwan’s Future
As the legislative minority, the ruling DPP is pursuing every available institutional response to counter the budget cuts. On February 27, with presidential approval, the Executive Yuan vetoed the budget reductions. However, the KMT-TPP majority overrode the veto on March 12. In response, the DPP legislative caucus plans to petition the Constitutional Court for an injunction. If granted, the injunction would suspend the validity of the current budget passed by the Legislature. Under Taiwan’s Budget Act, the government could continue functioning by operating under last year’s budget levels.
However, the Court itself remains effectively paralysed by legislative reforms enacted by the KMT-TPP majority last year. The reality is stark: there may be no constitutional mechanism left to stop these budget cuts from taking effect. It is against this backdrop that a nationwide effort to recall KMT legislators has emerged—a de facto vote of no confidence in the current legislature.
Yet, with the potential recall vote still months away—in August 2025—Taiwan’s security crisis is already unfolding. While there is no direct evidence linking Beijing to these budget cuts, the Chinese Communist Party (CCP) remains the clear geopolitical beneficiary of Taiwan’s weakened defences. Recognising the urgency of the situation, President Lai Ching-te has proposed increasing defence spending beyond 3% of GDP, using a special budget to safeguard Taiwan’s security. The stakes could not be higher: Taiwan must choose between strategic resilience and slow erosion under external pressure. At this critical juncture, ensuring Taiwan’s long-term security is not just about funding—it is a test of national will.
You-Hao Lai is a practising lawyer and think tank fellow who previously advised the President of the Judicial Yuan, Taiwan’s highest judicial authority. He is also a doctoral candidate at George Washington University Law School and holds an LL.M. from both the National Taiwan University College of Law and Harvard Law School. Gahon Chiang is a legislative and policy Analyst in the Legislative Yuan, focusing on foreign and national security policy. He holds a master’s degree in international relations from National Taiwan University and serves as the youth representative to the Taichung City Government.
This article was published as part of a special issue on ‘Taiwan’s Budget Crisis’.