The rich and influential are clearly worried about anti-business sentiments. It is not often we hear tycoons calling for higher taxes but this is what property developer Henry Cheng Kar-shun of New World Development did this week. He said there was a need to redistribute wealth in Hong Kong and a moderate rise in profits tax plus a levy on developers' income from property sales could help the poor.
An allegation frequently heard is that property tycoons and the government 'collude' to keep land prices high. Officials won't confirm there is a policy to keep prices high but the government sees its role as one that safeguards public revenue 'through the policy of not selling land cheap', which in effect means supply has to be managed.
That is the reason the financial secretary addressed land sale arrangements for residential and commercial sites in his budget, in light of public complaints about astronomical property prices.
The government does have ultimate control over land supply and, therefore, prices. Land income is a key source of its revenue.
In the budget, the financial secretary refers to the government's role in 'ensuring steady and adequate land supply'. The itemising of sites that are to be made available for sale in the coming few years and the number of flats they could generate tell developers a lot about government intentions, but it is not easy for the general public to really understand what impact they will have on society.
The appendices reveal land income is expected to be HK$62 billion in 2011-12, making up 16.5 per cent of total government revenue. Stamp duties make up 10.7 per cent of total revenue and a good chunk is related to property transactions. The government expects similar figures for the next five years. In other words, in selling more land, it expects healthy incomes from land and land-related transactions in future budgets.
A high land price policy serves developers, too, as they depend on a rising market to produce capital gains on land banks and development under construction.