A public consultation on a goods and services tax is expected to be launched within the next two weeks as the government formally takes its case for the controversial levy to consumers and businesses.
The government would propose a levy of 5 per cent, a senior government source said. Earlier studies have shown a 5 per cent GST would generate revenue of about $30 billion a year but would ultimately be revenue-neutral.
'The consultation will definitely be launched before the end of this month and I expect it to happen within the next two weeks,' said PricewaterhouseCoopers tax partner Tim Lui Tim-leung, who is often consulted by the government on key public financial issues.
The consultation paper was mainly expected to flesh out the argument for a GST, address the public's concerns, detail measures to help offset the levy for consumers, such as salaries tax cuts, and seek views on key issues, including the possibility of exemptions for certain products, services and businesses, Mr Lui said.
Financial Secretary Henry Tang Ying-yen has said the government intends to provide tax refunds to tourists and allow importers to defer payments. Compensatory measures will also be proposed for consumers, including increasing Comprehensive Social Security Assistance payments and lowering other taxes.
A GST works by using businesses as collection points for the tax payments. A senior government official explained that this meant the price paid by a consumer for any product or service, such as a holiday package, an electricity bill or a visit to the doctor, would incur a tax charge, or an output tax. Similarly, businesses would pay a tax on purchases of raw materials, called an input tax.