Jake's View

Hong Kong’s pension puzzle: How to determine who is too rich to qualify?

PUBLISHED : Wednesday, 13 April, 2016, 10:41pm
UPDATED : Wednesday, 13 April, 2016, 10:42pm

Instead of stating how poor someone should be to qualify, Hong Kong could discuss how the rich could be excluded from its pension scheme, a World Bank expert on retirement protection suggested yesterday.

SCMP, April 13

The trouble with some brilliant ideas is that the people who conceive them don’t stop to ask a few simple questions before proclaiming their brainwaves to the world. I have just one question here:

How are we to determine who is too rich to qualify for the pension?

The obvious answer does not work in Hong Kong. We cannot go to the income tax records. Leave alone that some very serious questions about personal privacy would arise if we used tax records this way, the big problem is that we do not have an income tax, only a salaries tax.

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This means that some of the very richest people in Hong Kong would immediately qualify as very poor. They take no wage or salary. Their money comes from dividends, interest payments or capital gains and we do not tax these forms of income.

Still, it would be easy enough to eliminate the very obvious tycoons. We can send them a letter once a year saying, “Prove to us that you are rich so that we can eliminate you from the list of people receiving a small payment that you do not need anyway and that would demean you to take.”

The clear message of this letter is, “Throw this piece of paper in the bin”, which is inevitably what will happen to it and serves our purpose beautifully. The tycoon did not reply. Take his name off the benefit list.

Alternatively, we can do it the other way round. We can send him an annual letter saying, “Prove to us that you are not rich so that we can put your name on the list.”

We shall leave aside that there is a slight difficulty, just an eeny-teeny one, in proving something that is not true or in proving something that may be true but for which only negative evidence is accepted.

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We shall leave it aside because this letter would also never be answered. It would also go straight to the bin, which, again, is just fine because the tycoon’s name would again remain off the list.

No, the system works perfectly for eliminating the rich from payment of our government pension. The problem lies rather in how the poor would fare as, in order to be equitable about this, we would have to ask the question of everyone. Without income records from the taxman, we have no other benchmark.

Thus we ask the poor man, “Prove to us that you are rich”, which he cannot do because he is not rich. We therefore take his name off the list as he did not answer the question.

Alternatively we ask him, “Prove to us that you are not rich”, which again he cannot do because he cannot prove that he does not have an offshore bank account in Bongo-Bongo.

It is infinitely harder to prove that you do not have something than to prove that you do. Our man therefore does not give us the proof we want and his name goes off the list.

Yes, I agree. This is all very silly. That’s just my point. This is a very silly way of doing things. Qualification for payment of a benefit by disproof of need rather than proof of it is just plain silly.

Means testing runs counter to the spirit of retirement protection

What is more, it does not get us around the objection that many people have to a means test of poverty. They find it degrading as it is not pleasant to have to tell strangers that you cannot take care of yourself. This is why the hunchbacked old woman who sweeps the stairs near my home is so proud of herself. She still pays her own way.

But we do not get rid of the means test by selecting against wealth rather than selecting for poverty. We simply rephrase the question and, in fact, make it even more degrading. Go ask that woman who sweeps the stairs whether she is rich. She will rightly take that as an insult.

And yet we would have to ask her. God has not given us the non-qualifier list we want. We therefore have to ask people.