Fiddling while Hong Kong pollutes

In January, before the budget, before the publication of the government's goods and services tax proposal, I proposed in this column the adoption of an energy tax. It would broaden the tax base, be easy to implement, be fair to all consumers and economically neutral.

It could also help the environment by cutting greenhouse-gas emissions.

Since that time, the argument for such a tax has increased dramatically. The GST proposal has been so strongly criticised by almost every political party that it is effectively dead. And now concern about climate change has moved to centre stage among global issues. It is likely to be with us a lot longer.

The mainland is increasingly focused on the damage to the health of its people being caused by air and water pollution. If for no other reason, Beijing is likely to agree to play a much larger future role in controlling emissions, and the search for low-cost alternatives to fossil fuels.

I am not suggesting that an energy tax would have a major impact on energy consumption in Hong Kong. But it would be a small contribution to the wider global issue and send a message that Hong Kong wanted to move from laggard to leader.

One may argue that Hong Kong does not need new taxes because it is flush with other revenue, including revived land sales. That is not the point. Such a tax would obviate the alleged need for a GST to broaden the tax base. It would produce a reliable revenue stream which could, depending on other circumstances, be used to finance cuts in other taxes or increase spending on the aged.

A 30 per cent tax on electricity and gas usage would raise some HK$15 billion a year, or the same as a 3 per cent GST. About 25 per cent would fall on households, where energy spending is roughly proportionate to household income.