As the tax base is broadened, it is inevitable that most Hong Kong residents will be paying more of their salary to the taxman. But how, and who will pay the most, remain matters of speculation. Most tax specialists agree that an increase in salaries tax is not likely. It would be an extremely unpopular move, as it would reduce incomes at a time when many households are still carefully budgeting their costs. PricewaterhouseCoopers (PWC) tax partner Peter Yeung said it would threaten Hong Kong's competitiveness by increasing the cost of doing business. '[Businesses] would be under heavy pressure to give their employees a little more.' Horwath Tax Hong Kong tax director Debbie Annells said she would support a special high rate of salaries tax for the super-rich but she admitted the 'supertax' would not be popular among policy-makers or the general public. Arthur Andersen partner Marcellus Wong Yui-keung said marginal tax rates could increase slightly, as they had been reduced in recent years. Three years ago, the top tax band was reduced from 20 per cent to 17 per cent. Moving it back up to 20 per cent, or even to 25 per cent, was a possibility. Lowering the tax threshold is not likely, even though only about 40 per cent of salaried employees earn enough to pay tax at present. Apart from being a very unpopular measure, hitting low income earners, it would not be expected to provide enough new tax dollars to be worthwhile. By far the most widely expected change to tax would be the introduction of a consumption tax or value-added tax. Ms Annells said the idea of such taxes had been studied and draft legislation had been drawn up some time ago. Generally such taxes would be added to the cost of goods and services, or added at the point of sale. Initially, the tax would be expected to be in the region of 3 per cent, to soften the impact as much as possible, although it could then be raised in subsequent years. The tax could be applied to all goods, or could be restricted to luxury items. The items that might be exempt could include basic foodstuffs, such as rice and oil, baby items and household fuel. However, most household expenditure now covers a wide range of 'luxury' items including clothing, electrical goods, and some toiletries. Ms Annells said it could also be applied to such services as bank and brokerage charges. At 3 per cent, a consumption tax would have most impact on low-income households. 'Three per cent of something, when you have got much money, can be very painful,' Ms Annells said. KPMG tax partner Jennifer Wong said a tax on cosmetics, which existed about a decade ago, could be re-introduced. Items that are already taxed, such as alcohol and cigarettes, were almost certain to see tax levels increase. A departure tax was also widely expected, which meant households that frequently visited the mainland, Macau, or other countries would pay more. Such a tax would be relatively easy to implement, as the Government could use the KCR and the ferry operators to collect it. They would add the cost to the price of a ticket, increasing KCR fares to Lowu and on international ferry routes. KPMG's Ms Wong said that of the Government charges that could be up for review, one target could be vehicle registrations. 'The car registration fee has remained unchanged for years,' she said. The introduction of a capital gains tax was also possible, although tax experts said it was not likely to appeal to policy-makers. PWC's Mr Yeung said: 'Capital gain applies not just to property, but to all kinds of investment. 'When we change capital gains law, we have to ask if it [is to be] changed for a specific type of investment.'