Order wealth transfer to help poor

PUBLISHED : Sunday, 13 October, 2013, 12:00am
UPDATED : Monday, 14 October, 2013, 2:10pm

The widening wealth gap in Hong Kong is testament that upward social mobility has proven unattainable for those lowest down.

Government bureaucrats and the business sector will insist Hong Kong needs low taxes, non-interference and free markets to prosper and stay competitive. Unrestrained capitalism has further enriched those at the very top but condemned a fifth of Hongkongers to poverty.

Economic benefits and wealth creation have flowed mainly into property. The main beneficiaries of the tourism industry are the few landlords who jack up shop rents, not the many sales staff at luxury shops. A huge portion of government capital expenditure goes indirectly to landlords in enhanced asset values. When the administration decides to develop a location, or build a bridge to Macau, nearby landlords benefit. Some low-paying jobs are created, but property prices, rents and consumer goods all inflate faster than wages, so many end up becoming "the working poor". The average worker here has not seen a salary rise in real terms for the past decade.

Here, owning a home is a measure of absolute, and relative, upward social mobility. It determines whether one finds a marriage partner; can have children; and whether one can retire comfortably. It now takes an average of 14 years of median household income to purchase a property; an impossible dream for many, since about half the population are non-homeowners. The problem is worsened by exorbitant prices for private education and health care.

Corrupt leaders of resource-rich countries plunder their nation's natural wealth for personal gain, but the game here is to gain an advantage from owning property by keeping prices artificially high and supply low. This excludes many middle- class people from home ownership, making them rent slaves. Low interest rates and the dollar peg are lame excuses.

An annual property value tax (above a certain value), higher rental income tax, and, very importantly, a high property inheritance tax are needed. A property value tax would actually be a wealth tax - making taxation more progressive. This is needed to reduce inequality.

The stamp duty increase already imposed on transactions may reduce speculation, but the core of the problem is that prices are already too high. A retrospective means of transferring wealth back to the middle class and the less fortunate is necessary.

Bernard E .S. Lee, Tsuen Wan