Hong Kong academic tipped to be welfare minister denies calling for capital gains tax

Controversy stemmed from interview in which he urged narrowing city’s wealth gap

PUBLISHED : Tuesday, 13 June, 2017, 10:03am
UPDATED : Friday, 16 June, 2017, 9:32pm

The academic tipped to be welfare minister in the next government has denied advocating a capital gains tax to help tackle the city’s growing wealth gap and says he only suggested society discuss the matter.

Dr Law Chi-kwong’s remarks in a TV show on Sunday triggered a furious backlash in political and business arenas.

Speaking at the South China Morning Post’s Celebrating Hong Kong’s Coming of Age conference on Monday, Law said: “I just want to clarify I am not favourable for anything called capital gains tax in Hong Kong although that is something.”

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The controversy stemmed from Law’s interview with TVB’s On the Record, where he said the city would need to look into tax reform to narrow the wealth gap, which has hit a historic high.

Law, a social policy expert at the University of Hong Kong, said: “I told the [host of the show]: ‘Can I say Hong Kong cannot discuss it? Maybe you can, but I do not think the government should.”

He said society should discuss the option of a capital gains tax, although he on the programme it would be highly controversial and difficult to implement.

I just want to clarify I am not favourable to anything called a capital gains tax in Hong Kong
Dr Law Chi-kwong, HKU academic

Law also floated the less contentious alternative of abolishing the 15 per cent standard tax rate, with high earners instead paying the 17 per cent marginal rate on part of their income.

But the remarks by the veteran Democrat, tipped to be secretary for labour and welfare when Carrie Lam Cheng Yuet-ngor takes over as chief executive on July 1, was slammed by pro-establishment lawmaker Jeffrey Lam Kin-fung.

He warned a capital gains tax would harm the city’s economic development and accused Law of having a limited knowledge of the tax system.

Lawmakers across political spectrum also cautioned against Law’s remarks on Monday.

Chan Chun-ying, representing the finance sector, said he disagreed with using taxation as a means to tackle poverty as the city already had a huge surplus and reserves.

Pan-democrat Kenneth Leung, a tax consultant, said a gains tax – which was complicated and unlikely to generate a large sum – was not “a good direction for the public to discuss”.

He added that many countries were considering scrapping the “unrealistic” tax. Abolishing the standard tax rate would be a less controversial option, Leung said, and might appear fairer to society as only a minority of taxpayers earning over HK$200,000 a month would be affected.

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But he stressed the need for more research and consultation on tax reform.

Lam said on Monday she planned to host a summit on new directions for taxation later this year to collate more views on two specific measures included in her election manifesto. They are a two-tier profit tax system and additional tax deductions to encourage firms to spend on research and development.

Meanwhile, Law, who is also a member of the Poverty Commission and the only pan-democrat expected to join Carrie Lam’s cabinet, said at the forum that the city’s rapidly ageing population in tandem with a shrinking labour force posed huge challenges.

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He said the government should give a hand to the working poor and elderly living in poverty, and one important task was to develop instruments to translate the assets of old people into a regular, safe and stable stream of income.

Lau Ming-wai, chairman of the Commission on Youth, said there was much room for non-government actors to play a role in alleviating poverty and reshaping the labour force.

Leong Cheung, the Jockey Club’s executive director of charities and community, said Hong Kong needed to look for smart solutions to social problems as throwing money might not necessarily help.