How higher estate taxes can make Hong Kong equitable
High property prices and rents are among the major causes Hong Kong is losing its competitiveness. It makes living and doing business here harder.
Whether one is a doctor, restaurant owner or jeweller, businesses have to pass on the cost of rising rents to the customer - which goes directly into the landlord's pockets. It is clear that government policies in the past decade have mostly benefited landlords or property owners and not most of us, creating huge wealth gaps. A low tax system and Hong Kong's sacrosanct laissez-faire policy is not working for the grass roots.
We must come up with a redistribution process that transfers back to society the money that landlords and rich property owners earn. This must come in a form of an estate tax (for properties above a certain value), higher rental income tax, property inheritance tax and capital gains tax on the appreciated portion of the property.
These are not excessive measures by any means. In the United States, the estate tax has just been raised to 40 per cent from 35 per cent for properties above US$5 million in the latest "fiscal cliff" deal.
The US Congress is often split over taxation issues, while in Hong Kong, political groups squabble over problems such as democracy or the chief executive's integrity, but offer few solutions.
Developed, democratic nations have higher taxes, especially on property. This revenue funds education, health care and other social securities for the needy.
We blame other macroeconomic factors such as low interest rates from the dollar peg, the world economy, the threat of rich mainland property speculators, and even the lack of land (although Hong Kong is nearly two times the size of Singapore), or even property hegemony by developers. But have we taken enough corrective action to deal with this?
Our current taxation system is rather flat or regressive, favouring the rich.
American jurist Oliver Wendell Holmes Jnr said, "Taxes are the price we pay for a civilised society." Are we on a par with the Nordic/Scandinavian countries, America or Japan that have higher taxes, or do we belong to the group of rogue, offshore, low-tax heaven economies where money launderers and tax evaders go?
Cage homes, subdivided flats and an average Hongkonger needing to work 13.5 years to buy an average home here is not synonymous with a democratic, developed and civilised society. We must reform our whole tax system, especially taxes on property ownership.
Bernard Lee, Tsuen Wan