A tax policy that could address several of Hong Kong's challenges would recognise that:
- Property is a scarce resource in Hong Kong;
- Hoarding of property places a burden on society, particularly when premises are left vacant;
- Due to low interest rates and property taxes, the cost of carry for vacant flats is too low; and
- Raising property taxes would help address any perceived future government revenue shortfall.
To avoid penalising average Hongkongers, property tax should remain unchanged for the first residential property held in the name of each permanent identity card holder. Because a person or family only requires one home to live in, however, a second home in the ID card holder's name in Hong Kong should be subject to double the current quarterly rates.
A person rich enough to own two or more homes should be taxed more for owning a resource so scarce that the government is forced to consider measures that have a heavy social cost, such as building houses in our country parks. Third homes and fourth homes should face triple quarterly rates.
Greater transparency in the housing market should be encouraged by promoting titles held in the name of the ultimate beneficial owner, rather than in company names. Residential property owned by a company is either for investment or, possibly, for money laundering.
Property held in company names should also be subject to triple quarterly rates. To avoid penalising families that own a single property through a company structure, the government could allow a one-time stamp-duty-free title transfer to a real name permanent ID card holder.
Some rich investors will continue to hoard empty property despite higher tax rates, but at least they will contribute more to the government coffers by doing so.
This reduces the future burden to the government of providing health and social benefits to the average Hong Kong person.
Higher quarterly rates may be passed on to renters. However, outside Hong Kong Island, the landlord assumes liability for quarterly rates in most leases and higher quarterly rates would provide an incentive for more landlords to compromise on rental fees rather than leaving flats empty for months with offer prices way above market - as is currently the case. Increasing supply would benefit renters significantly.
Unfortunately, vested interests, including senior government officials who enjoy beneficial ownership of multiple properties, will likely oppose this sensible tax policy.
Keith Noyes, Clear Water Bay