• Thu
  • Dec 18, 2014
  • Updated: 1:56pm
NewsHong Kong
SOCIETY

New tax of up to 2.5pc proposed to fund HK$3,000 a month pension for all Hongkongers

Official suggestion to Commission on Poverty is for a universal system with no means test

PUBLISHED : Wednesday, 20 August, 2014, 7:07pm
UPDATED : Thursday, 21 August, 2014, 9:21am

Every Hongkonger over 65 - rich or poor - would get a pension of HK$3,000 a month without a means test under a scheme put forward yesterday.

A long-awaited government-commissioned study said the pension should be funded partly by contributions ranging from 1 to 2.5 per cent of employees' salaries, paid by both employers and workers.

The government would need to inject HK$50 billion but an additional profits tax - as groups such as the Federation of Trade Unions proposed - would not be required.

The study was headed by University of Hong Kong academic Nelson Chow Wing-sun. "If the government can make a decision by 2017 [on whether to introduce the scheme], then I would say that my effort on the study had not been wasted," Chow said after a presentation to the Commission on Poverty yesterday.

Under the suggested "payroll old age tax", those earning less than HK$10,000 a month and their employers would contribute 1 per cent of the worker's salary.

For those paid less than HK$6,500 a month, employers would contribute 1 per cent and workers would be exempted.

For salaries of HK$10,000 to HK$20,000, both would pay 1.5 per cent and for HK$20,000 to HK$120,000 the amount would be 2.5 per cent.

READ: Six ways Hong Kong could fund a universal pension scheme

But the proposal has some limitations.

The pension pool is expected to go into annual deficit from 2026. By 2041 only about HK$13.5 billion would be left.

The influential Federation of Hong Kong Industries said Chow's proposal would be a "very huge burden" for employers to bear.

Chief Secretary Carrie Lam Cheng Yuet-ngor, who chairs the commission, said it needed more time to study the report.

Lam said she "could not commit the commission to any timetable for the time being except to assure you that the commission will … convene another meeting in due course".

Federation of Hong Kong Industries chairman Stanley Lau Chin-ho said employers were already required to make MPF contributions.

"Why do we need to make another contribution?" he asked. "Without a means test, [the billionaire] Li Ka-shing will also get the pension. Does he need it?"

Chow's report also included an analysis of five other proposals including those from the Alliance for Universal Pensions and the Federation of Trade Unions.

The report said the alliance's proposal would record a deficit from 2028 but still have HK$127 billion left by 2041.

The federation's proposal would record a deficit in 2017 and the money would be used up by 2030.

The reports both suggested an additional profits tax and transferring part of the Mandatory Provident Fund contributions to the pension scheme.

"A concern is the impact on public finance," Lam said. "Of the four proposals that do not have a means test, there will be sustainability problems by 2041. The money coming into the scheme will be less than the money to be given away."

Of the two proposals that did require a means test, the annual additional average expenditure for the government would be HK$8.1 billion and HK$15.3 billion.

"That is obviously a huge burden for public finance," Lam said.

Commission member Frederick Fung Kin-kee, of the Association for Democracy and People's Livelihood, said there should be an additional profits tax. "We have been talking about retirement protection for 30 years. Now the government has huge surplus … if it is not introduced now, it may be impossible to do so in the future," he said.

FTU lawmaker Tang Ka-piu said he welcomed any proposals as long as the elderly received HK$3,000 a month.

But he believed an additional profits tax would be more sustainable.

New People's Party chairwoman Regina Ip Lau Suk-yee said the best option would be one under which the government met the expense, without needing to adjust the tax system.

 

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This article is now closed to comments

oxymoron16
Don't expect employers, companies and people in high places are going to give into such scheme without putting up a fight. Anything that threatens their share of profits means war and corporate social responsibilities is not a strong suite in this part of the forsaken world. As for the employees, many hardly make ends meet and to have a small chunk taken out is like asking for a pound of flesh as many are in survival mode let alone worry about their future.
So that leaves the question: what would the bureaucrats do? Injection of Billions? LOL. They'd rather spend it on super cross boarder bridges or high speed monorail or what have you to handshake with the motherland.
My poor Auntie is surviving solely on some petty fruit money that ain't worth squat, friend waited years to get a surgery only to learn that he needlessly has to endure pain and sufferings and the last time I checked, there is no such thing as parking for the handicap spaces marked by blue in HK. This how much the government is taking care of the elderly, the needy and the handicapped.
-
If you have dual citizenship, growing old and with little savings, go back and stay the heck away from HK because this twisted place is unforgiving and you will not RIP without having the last shred of dignity stripped away when you are six feet under.
jamesgve
As a foreigner living in HK for many years one of the things I have always disliked is seeing how the elderly suffer here. Surely those in the middle to high income bracket can afford to pay a little more tax to help?
johndoe
Ah, the old "war on poverty", a new tax to fix the problem, heard it before, we know were this ends, look at Europe and US, it always drags almost everyone else down and raises debts massively on governments almost everywhere it is tried. In addition, many elderly are immigrants, predominantly from the mainland, who did not pay much tax at all and many permanent residents are live outside HK. All good reasons to not have any universal schemes at all. Raising the salary tax is even more outrageous. We all know where this will end up. It will not stop with 2.5%. Later it will be 3%, 6%, and then 10%, for all sort of good moral high ground reasons that the think tanks will come up with. Always a good reason to take hard earned money from workers and give it away as freebies. This makes it even harder for those who work to save for their own retirement, as now they not only have to save for their own retirement but also for others. If anyone should pay for this, it is property owners who are making fortunes in capital gains and rentals for virtually no labor effort. Raising the MPF contribution level and reducing MPF fees would make far more sense as a long term solution. A means tested CSSA also appears far more sensible, while cutting down on out of control infrastructure spending to finance it. If salaries taxes are raised, Hong Kong will start losing its low tax advantage while still having its high rent disadvantage.
BabyMan
The locals don't care and have no power anyway
virokick
Take from the rich middle class, Take much more from the rich tycoons, this is logical, ethical and must be done. Taxes are what we pay for a civilised society.
I feel relief when I see the ; elderly and poor being helped.
But I derive great pleasure when I see tycoons, big business and the General Chamber of Commerce start whining and screeching like a bitxx; when it comes to this universal pension scheme.
chaz_hen
The "Anti Occupy" crowd will come through and take care of the grannies and grandpas, right? Some free meals and bottles of water (and they get to KEEP the bottles after for recycling)!
don67
I think most people will not argue against our social welfare system helping the genuine needy even if that means we all have to contribute a little more. However, schemes such as the suggested universal pension without a means test does not even try to make an effort to target the right people. Even when you leave out the truly "rich" people, there are still plenty of the working/middle class who own the property they live in. Without a means test, these people will be eligible for this allowance too. Since these people are not wealthy, they may not have saved up a whole lot for their retirement. In time, they may need to either sell their house and become renters, or apply for a reverse mortgage to fund their retirement and maintain their lifestyle. However, if given this allowance, they stand a better chance of keeping their main asset (their flat) intact and passing it on to their children, as many Chinese people tend to do. Being able to pass substantial assets to the next generation is not a bad thing per se, but it does seem morally wrong when taxpayers' money (from both workers and bosses) is being used to help these people keep their assets within the family. In my opinion, the MPF scheme should be amended to increase contribution rates to levels which can sustain an acceptable standard of retirement. As for the elderly living in genuine poverty right now, they should be encouraged to apply for the CSSA, which is means tested. Maybe even up the CSSA.
sipsip1238
If you bother reading and researching a little from my other posts, you'd find that I do in fact volunteer and also act as an employer to encourage my staff to volunteer as well; and the amounts that I donate is much more than the 2.5% being asked.
The issue why this type of proposal is required is because there aren't enough people will to offer both their time and money to help the people in need. If there were enough people, then the underpreviledge would not need this in the first place.
And I am guessing from your tone that you are also one of the people who wouldn't give a damn as long as you get a comfortable life. Hard earned money, yes, that's why I work over 12 hours a day and still run a business outside of work and volunteer, it's because as hard as our work is, no one deserves to have to drag cardboard when they are 80+.
And that is very often the excuse I hear from locals about grannies having property, it certainly comforts you, but it doesn't hurt to give them a benefit of the doubt.
hkscmp123
"Study recommends....." ??
In HK, even if "CY Leung" recommends... nothing's gonna happen.
Maybe if Xi J.P. could recommend the same, that would help.
shazza
$3,000 is not really enough to live on if you are one of the elderly poor. It would be better to pay a larger amount, says $8,000 per month, but only to those who pass a means-test. For those with some assets, but no substantial income, they can be paid on a sliding scale depending on how much assets/income they have. Yes, means-testing can be abused by unscrupulous people, such as gifting away all their assets prior to retirement, but you can minimize the risk by having look-back provisions going back say, 10-15 years. Means-testing is one way to make sure the money goes to the people who really need it.

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