Experts' views on Tsang’s budget

Q&A with two Hong Kong Baptist University professors

PUBLISHED : Wednesday, 26 February, 2014, 2:29pm
UPDATED : Wednesday, 26 February, 2014, 4:20pm

Wu Boxiong, associate professor of economics at Hong Kong Baptist University.


Q: What do you make of Tsang’s decision to trim sweeteners by at least 30 per cent from the HK$33 billion doled out last year, and his warning that the city’s more than HK$700 billion financial reserves could dry up due to the ageing population?

A: Cutting down on sweeteners, even up to 50 per cent, is appropriate. If expenditure growth continually surpassed increases in income, Hong Kong would be in deficit and eventually its fiscal reserves would be depleted. One-off sweeteners are never the best solution. Full employment should be expected, and this should come with higher salaries and low rates of inflation, especially food inflation.


Q: Hong Kong’s middle class residents were hoping Tsang’s budget would offer them some relief. Do you think he give them enough "goodies"?

A: The salaries tax reduction of up to 75 per cent will help the middle class in terms of encouraging more talented people to work hard and be rewarded for their hard work. The middle class may not be as vocal as the grass roots in clamouring for handouts and subsidies, but if they are encouraged and given better chances to develop, they will bring more innovation to the city and create more job opportunies. I think the government is in a good position now even to cancel the salaries tax.


Q: The increase in housing has become a big issue in Hong Kong. Did the new budget address this area adequately?

A: Tsang said that the housing policy should remain despite the public’s divided views. But the policy is actually stiffling the housing market. Our goal should be to stabilise the market, rather than killing it.



Daniel Ho, associate professor of accountancy at Hong Kong Baptist University


Q: Tsang said the Government had a fiscal surplus of HK$12 billion and warned this would probably shrink to HK$9.1 billion in the coming financial year. How does that strike you?

A: It is understandable that some people want the government to give more one-off sweeteners. Others might want the government to spend more on investment. But as global economy markets will continue to be unstable this year, it is justified for the government to be a bit conservative.


Q: Do you think the government has shown an effort to tackle structural budget problems?

A: The government is trying to fix the tax system. Tsang talked about a waiver for stamp duty on the trading of all ETFs (exchange-traded funds) to lower transaction costs. This policy is a common practice in many other part of the world. Hong Kong is trying to catch up with the trend. But the Hong Kong government needs to find sources of new income besides land revenues and taxes from salaries. It is time to widen the city’s tax base. Suitable tax deduction affects the competitiveness of Hong Kong. Other Asian countries such as South Korea have given priority to new companies by making policies to support their development. Hong Kong will have to come up with similar tax policies to continue being attractive for business.





Interviews by Echo Hui