I AM NOT normally one to advocate quiet closed-door chats between private interests and government officials but one may be needed if the Hong Kong Jockey Club is to acquaint Financial Secretary Henry Tang Ying-yen with some facts of life. The club's chief executive, Lawrence Wong Chi-kong, announced on Sunday that the club's turnover was down 9 per cent from the previous year and that next year would see a further decline unless something was done to change the way that betting was taxed. Mr Tang, however, does not yet appear to see any threat to fiscal revenue in bets and sweeps duties. In his budget earlier this year he estimated a 7.8 per cent increase from this source for the fiscal year that ended on March 31 and, as the chart shows, he forecast that the figure will rise further in the current fiscal year. Horse racing brings in about 90 per cent of total income from bets and sweeps. Someone has it wrong here. Either Mr Wong is crying wolf in order to get a better deal for the club or Mr Tang has his fingers crossed and is hoping against hope that this significant contributor to his revenues will stay up and allow him to achieve his deficit reduction targets. He is counting on it to bring in almost 8 per cent of his operating revenues this year and that is a record-high figure. I think the facts speak for Mr Wong. There is no use fighting modern communications technology and when 13.5 per cent of the Jockey Club's turnover goes to taxes, which he says is the highest figure in the world, punters are easily tempted to take their business to illegal bookmakers who have little overhead and pay no tax. But it is interesting to note that, in his comments on this, Mr Wong placed less emphasis than before on law enforcement to get illegal bookmakers out of the way and more on changing the betting tax to reduce the burden on the club. He is now calling for a tax on profits instead of on turnover to keep the club competitive. It was inevitable. Law enforcement was never likely to do the job for him. Take note, however, that what this would really come down to is the club paying the government much less in tax. You can understand Mr Tang's reluctance. He would have to hope that the shortfall could be made up by a huge increase in betting turnover in Hong Kong and, to get this, his reforms of betting would have to go a great deal further than a tax deal with Jockey Club alone. In short, I can see why Mr Wong is eager to make his point but I can also understand why Mr Tang should consider it an unwelcome one. Nonetheless, he must face it sooner or later and it would be best done sooner. TO GET THE wheels moving in transport matters, the best way is to put the horse before the cart. To get the money moving in transport matters we like to put the cart before the horse. You would think the way to do things with commuter rail is first to determine where your natural population centres are and then to build the railway to serve the housing. This is not the way we do it, however. First we build the rail and then, when we wonder how to find passengers for it, we build the housing to serve the railway. We did it when the MTR Corp built the Airport Express. First we decided to have a railway to the airport and then, in order to get more passengers for the new line, we looked for a likely place near the airport to build a population centre. We found one in the middle of nowhere, far from the rest of the city. Hey presto, Tung Chung. We are doing it again with the Kowloon-Canton Railway Corp. First we decide to build West Rail and then, when it turns out that the rail line does not have a big enough population catchment, we decide to build 13,600 flats along the West Rail and Ma On Shan Link to give it passengers. The worry that these new flats will somehow depress property values is no worry of mine. Leave alone that we can worry about it from 2008 to 2010, when this housing comes on the market, the problem over the next few years is more a shortage than a surfeit of supply. But if ever I were to move into one of these flats, I am not sure I would be entirely pleased to learn that the location of my new home was determined to suit the KCRC rather than to suit me.
