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  • Dec 22, 2014
  • Updated: 2:21am
CommentInsight & Opinion

Budget must watch out for Hong Kong's middle class

Philip Yeung calls for budget measures that help struggling families with education and rent

PUBLISHED : Wednesday, 20 February, 2013, 12:00am
UPDATED : Wednesday, 20 February, 2013, 4:12am

Once upon a time, Hong Kong was more than a city. It is an idea, beloved by all who believe in a fair existential struggle. Hard work used to beget honest reward. Now, this fabled town of bootstrap optimism resembles a dog-eat-dog compound.

We have become a pear-shaped society, with a swollen lower class and a shrinking middle class, the former trapped by impotent rage and the latter resigned to their fate in which the Hong Kong dream is receding from their reach.

Next Wednesday, the financial secretary will unveil another budget. Few expect him to redress the social ills. I, for one, have never understood why homeowners, who have grown fat from skyrocketing property prices and perennially low interest rates, still enjoy two distinct tax advantages over renters: tax-deductible mortgage interest payments, and rate rebates, while millions of renters who are at the mercy of gouging landlords get nothing.

It is wrong to use property as the base for tax rebates or deductions, as there are many owners of multiple properties. It is ethically indefensible to reward and encourage property speculators in a city with an acute housing shortage.

One measure open to the government to cool the speculation craze is to levy a rates surcharge on multiple property ownership. The idea of a rental rebate has been shot down by the financial secretary for fear of fraud, that is, the use of fake rent receipts. But what about an accommodation subsidy, applicable to all citizens with taxable income? This would eliminate indiscriminately lavishing public money on owners of multiple properties. The benefit would only go to individual taxpayers per filing, without requiring proof of rent receipts.

Since the handover, the middle class has seen its base systematically eroded by foolish policies. We have only two avenues for upward social mobility: entrepreneurship and education. The first is out because of sky-high rent; the second is no longer offering a level playing field.

Without broad consultation, the Education Bureau foisted the Direct Subsidy Scheme on us before the handover, and this unfair system has persisted. This is apparently a reward of financial freedom and academic autonomy for schools that are well-run. But the big problem is that these schools are fee-charging institutions, some with fees of up to HK$98,000 per year.

It begs the question: whatever happened to the idea of 12 years of free schooling? It is unthinkable that this could happen anywhere else - taking good public schools and turning them into revenue generators without debate.

Shouldn't good schools be rewarded by being given extra support and academic autonomy, without being moved out of the traditional system? Where is the ethical underpinning and educational justification for this?

Having created this monster, the government must either stop the Direct Subsidy Scheme schools from charging or give parents an education subsidy to cover the cost. Ironically, many of today's government leaders come from dirt-poor households and benefited from free access to quality schools. Now they are denying others the same opportunities.

The government is wrestling with subsidising pre-school education, and is baulking because it is cumbersome and messy. The simple solution is to offer either a fixed education subsidy per school-age child, regardless of level or grade, or offer parents an equivalent in educational tax deduction.

Stealthily, we have become an unfair society. Many schools now demand proof of expensive extracurricular activities as part of their admission requirements.

When promoting a new proposal, officials are quick to take offence and treat dissenting views as a personal attack. That is why we are often stuck with the disastrous unintended consequences of their half-baked ideas. The Direct Subsidy Scheme is their most ignoble brainchild.

In this budget, the financial secretary must veer away from his old habit of offering the usual goodies and target the needs of middle-class families through three measures: raising the taxable income threshold; offering these families an accommodation subsidy; and providing an education subsidy. Failing this, they will slide further down the slippery slope.

Surely John Tsang Chun-wah wouldn't want to be remembered as the man who destroyed Hong Kong's middle class?

Philip Yeung is a senior communication manager at a Hong Kong university. philipkcyeung2@yahoo.com


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Budget is to put financial resource to delive a policy. Don't expect too much as HK problems is structural that is very hard to change without major shift from years of relying on expensive land to staff a huge government with a very narrow tax base. Now we are in a vicious cycle as most of the economical benefits are driven towards landlords and developers making HK very inefficient and ineffective in all aspects. Whenever you go restaurants, shopping, you will seeing quality is going downhill as majority of the resources are paid for rents rather than improving services.
But you alway have to blame hk people too. I read an article this morning a lady had to shut down her fashion shop due to high rent and planning for going online but worry HK people are not ready. That's exactly the problem of hk people. Everywhere in the world go online except hk. Some argue because hk is convenient. NOT TRUE! I live both HK and USA and I found Hk is extremely inconvenient for shopping. I need to spend 2 to 3 hours grocery shopping in HK vs in US I spent about 45 mins top for the whole week grocery because HK traffic is bad and choices are limited. The other day I try to buy a 2T drive in tai po I cound not find one in the whole tai po! VS in US you can do it on Amazon much cheaper and delivered to your door next day free. Or just stop by at Bestbuy and Office Depot before doing my grocery. All within 5 mins driving.
I'm a tech guy I also thought initially online is the way to go for hk high rent but so far I am not seeing that. Plus HK has the worst Technolgy amongst the developed countries as our websites are really low tech!
The shopping space in US is much bigger and much convenient than HK as theirs shops are within 5 to 10 minutes from anywhere and many many more choices than HK. But US still have very good online shopping probably 1,000 times better than HK in efficiency and choices. So Hk need to change to catch. Many problems are our fundamental problems that need to be changed.
Rental subsidy is much in need by the middle class renting flats. It is indeed very unfair to those people paying very high rent for a small flat and at the same time paying heavy salary tax to enable their landlords to enjoy a lovely tax rebate from the Government. They are like candles burning at both ends!
Any form of accommodation subsidy will simply drive up rents, unless the government addresses the fundamental issue of insufficient housing supply.
The problem with an accommodation subsidy administered as suggested here is that it excludes those who most need it, the poor, who have no taxable income. Building a stronger middle-class must be achieved by lifting people out of poverty. End the mortgage interest tax break and put the tax generated into improving education and medical services. Create a means test on profits tax so that small businesses pay nothing and big monopolies pay the top rate of the current 16.5%, giving young, educated entrepreneurs short on capital a better chance to build and stay in business, escaping the poverty trap.
Well Said Philip! I like your comment about giving rates rebates to owners of multiple properties. However, I don't agree with your comment about owner of single property growing fat from skyrocketing property prices and perennially low interest rates. Nothing is gained from selling your only property unless you die or move away from this city, as you have to find another place to live. Rates rebate should be given to owner of single property, and renters, not the landlords!
There should not be any rates rebates at all.


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