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Taiwan leader Chen Shui-bian has for the first time admitted that he has used other people's receipts to write off his official expenses and that his family accepted free coupons from a local businessman to shop at the Sogo department store, according to media reports from Taiwan.

Chen made the confession in Palau on Tuesday, but insisted he has never been involved in illegal activities.

Palau, an archipelago in the South Pacific Ocean, is one of few foreign countries and regions that have maintained "diplomatic ties" with Taiwan.

Some secret "diplomatic" work could not be conducted via Taiwan's "Foreign Ministry", so he used special funds, referring to the public money he wrote off with receipts he collected from other people.

Chen admitted to the practice after journalists bombarded him with questions. All the money was been used for public purposes and none of the reimbursements went into his own pocket, he said.

Chen declined to reply whether he would step down following this latest admission of apparent financial malpractice.

Early this year, local procurators discovered a large number of receipts from unclear sources and shopping coupons from Sogo.

In April, Chen's office declared that Chen would step down if he is found to be using other receipts to write off official expenses and receiving Sogo coupons.

In related developments, local media and people in Taiwan have urged Chen to step down as he had threatened judicial departments and gone back on his own words. Some local newspapers editorials called him a "rascal".