The relationship between taxation and welfare regime in Taiwan has largely been unexplored to date. This study argues that since taxation capacity of the state decides the fate of new welfare programs such as the public provision of long-term care, it also affects the trajectory of the welfare regime. Through the analysis of Taiwan's tax revenue structure and tax base, this study reveals that Taiwan, unlike many new democracies, has shone away from relying on goods and services taxes but at the same time continues to provide preferential tax treatment for the corporate world. The result has been the erosion of tax base which makes introducing new welfare programs extremely difficult even when new policies allow for credit-claiming. Therefore, the familialistic welfare regime persists because of a weakened taxation capacity. Furthermore, the political determinants of the weakened taxation capacity can be found in identity-based party politics, an influential capital vs acquiescent labor and the limited bargaining power of civil society.

This paper examines the policymaking process and contents of the two major social security policies of Taiwan in the 1990s. The National Health Insurance (NHI), which was introduced in 1995, was a mixture of success and failure. While it brought about universal health insurance, part of the original objective of creating a comprehensive welfare system through the NHI initiative was not realized. The attempt to introduce a National Pension Program (NPP) in 2000 went through dramatic turns in both policy contents and the prospects for implementation. Though it was originally designed as a modified form of social insurance, a general tax revenue‐funded defined‐benefit scheme was added as an alternative when a new government came into power. The bill, however, was withdrawn before the actual deliberations began. The author argues that policy legacies and actors, and the interactions of these variables within different policy phases, determined the policy contents and changes.

In postwar Taiwan, the legitimacy of the Kuomintang (KMT) regime had depended on the cold war structure and the civil war with the Communist Party. As the KMT regime penetrated Taiwanese society, it exercised tight control over the society through the medium of the strong party organization. However, in the process of democratization that started in the 1980s, the KMT's authoritarian political rule began to crumble, forcing the government to respond to people's demands in order to survive. The reform and improvement of the social security system in Taiwan were brought about against this backdrop of state reformation.