Government backs down on first-registration tax increases

Treasury says the compromise balances the need to raise revenue while shielding the motor trade from the full brunt

Legco yesterday approved scaled-down increases in the first-registration tax on vehicles following a last-minute government concession.

Having initially sought a 2?-fold increase in the maximum tax - up from 60 per cent to 150 per cent - the government yesterday presented a proposal to increase it by only two-thirds, to 100 per cent.

The maximum rate applies to the portion of the price of luxury cars above $500,000. The government also gave in to pressure to lower the tax rates for motorcycles from 40 to 35 per cent.

The government now expects to raise an additional $350 million a year in revenue, half the $700 million Financial Secretary Antony Leung Kam-chung envisaged in his March budget if the higher rates had been approved. The increases are among measures proposed to tackle the $70 billion budget deficit.

On Monday, Legco president Rita Fan Tsui Lai-tai ruled that two amendments - proposed by Selina Chow Liang Shuk-yee and Audrey Eu Yuet-mee to scale back the increases originally sought by the government - should proceed to a vote. That prompted the government's last-minute compromise, which was approved by an overwhelming majority in a Legislative Council vote last night.

Treasury chief Frederick Ma Si-hang said the compromise struck a balance between the need to raise tax revenue and the desire to minimise the impact of the higher taxes on the motor trade.