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CY Leung policy address 2014
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'Give the middle class tax breaks' urges Taxation Institute

Taxation Institute urges John Tsang to increase allowances for group left short in the policy address and to widen the city's tax base

PUBLISHED : Wednesday, 22 January, 2014, 4:34am
UPDATED : Wednesday, 22 January, 2014, 9:36am

Next month's budget should feature higher tax allowances and bigger deductions to make up for the fact the middle class got "nothing" from last week's policy address, the Taxation Institute said yesterday.

The institute, which represents 2,700 taxation professionals, also suggested that Financial Secretary John Tsang Chun-wah should consider reforms to broaden the tax base, including taxing luxury goods and introducing more green levies. The institute has submitted budget suggestions every year since 1980.

Pressure is mounting on Tsang to alleviate pressure on the middle class, a group Chief Executive Leung Chun-ying was accused of neglecting in his policy speech, while promising HK$10 billion in welfare and initiatives for underprivileged groups.

"The middle class has not received any tax incentives recently, so … we suggest that salary tax bands [the blocks of earnings subject to progressively higher tax rates] should be widened from HK$40,000 to HK$50,000," institute president Joseph Yau Yin-kwan said. "It will lower the burden on taxpayers, especially the middle class, while not narrowing our tax base."

The allowance for dependent parents and grandparents should rise HK$2,000, to HK$40,000, for each dependent aged 55 to 59 and HK$4,000, to HK$80,000, for those aged 60 or above, he added. An allowance of HK$100,000 should be introduced for those caring for parents aged 80 or above.

The institute said a survey of professionals and businesspeople in September and October found that 71 per cent of respondents felt the city's tax base was "too narrow", with a tax on luxury goods sales the most popular solution, favoured by 37 per cent. Green taxes, on things such as road traffic and waste disposal, were favoured by 33 per cent.

Just 40 per cent of Hongkongers pay salaries tax. A tax on goods and services tax has long been mooted to expand the tax base, but has faced fierce opposition.

Accountants' body CPA Australia also called for a comprehensive review of the tax system, in light of the huge increase in public spending in the policy address. It said a luxury-goods tax should be introduced as the first step towards a comprehensive goods and services tax.

Tsang warned last month that the city would have to expand its tax base or slip into a structural deficit as spending grew to deal with an ageing population.

Meanwhile, Hang Lung Group tycoon Ronnie Chan Chichung yesterday praised Leung's policy speech as a "good one", but revived his war of words with Tsang, saying he "should not be complaining about getting poor" due to welfare spending. Rather, Tsang had "spent on the wrong areas, such as offering funds for hospital renovation instead of simply adding new ones".

In July, Chan slammed Tsang as a "big sinner" for sitting on huge reserves of public money.

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joyalsofi
"... a luxury-goods tax should be introduced as the first step towards a comprehensive goods and services tax."
The only surprise here is that this favored and most regressive tax (goods and services) was not mentioned sooner in the article. Perhaps feigning concern for the middle class was merely an introduction to the real goal "a comprehensive goods and services tax." No mention of taxing dividends or increasing the rates on top earners or implementing a financial transaction tax as was recently passed in France. As always the lower classes pay the most for government which benefits the upper classes the most.
chuchu59
If the FS had it his way the middle class will again get nothing. Saving for a rainy day makes good financial sense but not at the expense of middle class taxpayers who are effectively the sandwich class. I could be wrong but it seems that the CE wishes to lighten the burden of the middle class through the coming budget but met great resistance from the FS. TSANG, This isnt financial prudence. Yes, you need to balance your books but not at the expense of middle class taxpayers who are already disgruntled at being left out in the cold. You need to cut down on civil service perks and needless expenditure on infrastructure. Every little bit helps. For a start, clamp down on needless training expenses, especially at overseas institutions for every Tom, **** and Harry who apply. I have heard of some cases where the officers concerned learned nothing that will be of relevance to their jobs so its sheer wastefulness.
There are a million ways to contain expenditure. Take a hard look at your recurrent expenditure and examine their effectiveness instead of trying to block new initiatives however beneficial they may be to the society.

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