Hong Kong should consider introducing indirect taxes and importing more workers to cope with the strain caused by an ageing population, the former commerce minister says.
It was an "indisputable fact" that economic growth would slow as an elderly population caused government expenses to rise but tax revenues to fall, Frederick Ma Si-hang told a financial sector luncheon yesterday.
"If we do nothing, we'll have to use our fiscal reserves," said Ma, who resigned as secretary for commerce and economic development in 2008 due to a health problem. "Hongkongers may think the issue belongs to the far-off future, but time flies. If we only start to tackle the problems after 10 years, it may be too late.
"The government should start saving for a rainy day."
Establishing a "future fund", as suggested by the working group on long-term fiscal planning in March, was "not a bad idea", but was more an "accounting trick" than a solution. "The HK$200 billion dollars set aside won't make more money - at most several per cent in interest," said Ma, who also served as secretary for financial services and the treasury from 2002 to 2007.
Ma suggested the government review its population policy, spend only when it had to in order to reduce its fiscal burden, widen its tax base with indirect taxes and boost competitiveness with labour and talent imports.
He said it was "difficult" to bring in tax reform but Hongkongers needed to understand that the interests of the next generation were at stake. Ma hoped that adopting universal suffrage for the 2017 chief executive poll would prompt debate on long-term fiscal problems. "No matter who becomes the chief executive, he has to have his thoughts on the issue," said Ma. "Voters have to ask candidates how they would solve our problems and that will lead to more discussions."