Twelve ways to fight poverty - now

PUBLISHED : Monday, 24 January, 2005, 12:00am
UPDATED : Monday, 24 January, 2005, 12:00am

Chief Executive Tung Chee-hwa wants to tackle the issues of poverty and collusion between government and big business. That is great. Let us hope we do not have to wait for ever for action. Meanwhile, here are 12 proposals for getting on with the job.

First, however, a word for mega-rich whingers about Hong Kong going socialist and frightening off investors by helping the old, sick and unemployed. It is staggering to hear the nonsense on this topic from the inheritors of large amounts of money who think they are businessmen.

Lower-income people in Hong Kong may not pay salaries tax - but then, neither do most of the mega rich. But if you look at the levels of tax on their simple pleasures, such as smoking and betting, it is likely that many pay a higher proportion of their income to the government than those earning $3 million a year.

Poverty is as much a relative question as an absolute one, and Hong Kong's income disparities compare very badly with the likes of Taiwan, Singapore and South Korea, which all have effective income floors. Housing conditions are surely the worst in the world, relative to gross domestic product per head.

So, what can be done?

Apply corruption laws to big business. Typical of what happens was the case last week when an employee of Wharf (Holdings) was sentenced to seven years' jail for soliciting bribes to award contracts. But the companies which paid him millions to secure contracts and steal competitors' tender documents were never charged.

End all talk of imposing a goods and services tax (GST) sometime in the future. It may be the received wisdom of accountants and economists, but this tax is inappropriate for Hong Kong's situation and will exacerbate income differentials. There are simpler ways to tackle the fiscal deficit.

Genuinely crack down on illegal labour. Ready availability of illegal workers depresses unskilled wages, especially in construction, and is another example of business-government collusion.

Change the rules on one-way permits and contract labour to focus primarily on skilled migrants who will raise average skill levels in Hong Kong and reduce the oversupply of unskilled labour - at the root of the unemployment and poverty problems.

Devise an effective means test for public housing tenants, raise rents for those above a given level and divert the savings to pensions and health care for the elderly.

Broaden and steepen the tax base to increase the number of payers, and ensure that the still modest 16 per cent ceiling is reached at a much lower income level - say, $1.5 million for one income earner with a spouse and two dependent children.

Sell more land to ensure there is no rise in prices and help more lower-income earners enter the private market.

Instead of a GST, increase property rates and impose a tax on power utility bills. Both are easy to implement and non-discriminatory.

Abolish the Jockey Club's gambling monopoly. It is a drag on betting revenue and a huge subsidy to the club's rich members.

End tax relief on mortgage interest. This politically driven nonsense is especially absurd in Hong Kong as there is no tax on interest income. It was introduced by Donald Tsang Yam-kuen in one of his many attempts to ingratiate himself with developers and upper-middle income earners. It makes no economic sense and increases disparities.

Reduce the profit margins allowed to monopoly utilities.

Abolish the anticompetitive bans on parallel imports, which enable import agencies to overcharge. The current law rewards politically connected vested interests at the expense of the public.

So, there it is. Let's get on with it.

Philip Bowring is a Hong Kong-based journalist and commentator