A narrow tax base is low on our list of pressing problems

PUBLISHED : Monday, 24 July, 2006, 12:00am
UPDATED : Monday, 24 July, 2006, 12:00am

Among the most serious problems Hong Kong faces are pollution, an ageing population and health care. Yet, instead of coming up with proposals to address these grave concerns, the Tsang administration has launched a consultation on a goods and services tax - citing the need to widen the tax base and cut profits tax to keep Hong Kong competitive.

As we all know, Hong Kong is already ahead of the competition when it comes to low profits tax, and cuts will benefit only wealthy companies and widen the gap between rich and poor, adding to social disharmony.

On the problem of our ageing population, one of the groups that will suffer the most from a GST consists of those who paid salaries taxes for decades but now will not qualify for a salaries-tax cut: the retired. Their daily expenses and medical costs are already prohibitive, and no compensation promised by the government will make up for it.

Until the above-mentioned problems are resolved, it is inappropriate for the financial secretary to proceed with the consultation. Faced with a chorus of opposition, he should bow to public wishes or step down.

PETER WEI, Kwun Tong

A GST hits the small-business owner. Small and medium-size enterprises are by far the greatest contributors to domestic productivity, and their owners spend long hours on managing and developing business. With the introduction of a GST, much more time and cost will have to be devoted to collecting this tax for the government.

Hong Kong businessmen would do well to discuss this tax with their counterparts in Australia, who will tell them that hundreds of hours need to be diverted from core business activities to producing statements and payments for the tax department. New accounting procedures and endless GST determinations add to the complexity and aggravation, enriching accountants and causing bureaucracy to flourish.

A GST is not sustainable. In the long term, businessmen will become tired of doing the government's work of tax collection and aggrieved by the large bureaucracy charged with its administration.


Perhaps the rallying cry of the American War of Independence, 'No taxation without representation', may throw a new perspective on the GST debate. In Hong Kong, big business is now taxed most, so it is hardly surprising that it is the most represented. The vast majority of the population pays no tax, and is not represented. If a GST is implemented, we will all be taxed. Thus, we should all be represented. So it should be the trigger for democracy. No wonder big business doesn't like the idea.


Instead of a GST, why not consider a heavy tax on the consumption of energy, with surcharges on the use of electricity, gas and petrol? Stiffer taxes may encourage buildings to raise the temperature of their air-conditioning systems and motorists not to leave their engines idling.


I suggest we impose a GST of 20 per cent or more on luxury items only and forget about taxing daily necessities. Luxury items are bought by people who can afford them, and an extra 20 per cent won't hurt.


If Financial Secretary Henry Tang Ying-yen is so keen to widen the tax base, why doesn't he adopt the rather obvious and progressive solution of taxing the worldwide income of Hong Kong residents rather than hitting the poor with a regressive GST? It has always seemed iniquitous to me that, while working people in Hong Kong pay salaries tax, the city's idle rich do not pay a cent. The very least Mr Tang could do is introduce such an income tax at the same time as a GST, to make it clear that the burden is being shared across the whole of society.