The government's consultation paper on a proposed goods and services tax (GST) is an appalling document. It is repetitive, intellectually dishonest and based on dubious economics. Worst of all, it lacks any creative thinking while displaying the single-minded greed of the Hong Kong bureaucratic and business elite. Described as 'revenue neutral', it no longer even has the justification of plugging a budget deficit.
The bottom line of the proposals is to shift the tax burden away from taxes on salaries, property and profits, towards the vast bulk of the population. Although it does not conclusively opt for cutting salaries and profits taxes, those are the outcomes it most favours. It endlessly repeats the unsupported mantra that, without the ability to make such cuts, Hong Kong may become uncompetitive. And it suggests that, because only a minority pay salaries tax, the rest of the population has a free ride. Tell that to a worker on $7,000 a month who smokes, drinks a few beers and bets on the horses.
Incredibly, though the paper devotes many pages to the business and economic impacts of a GST - and accompanying tax changes and relief measures - nowhere is there a word on its impact on income distribution. Yet, this is a government that claims to be concerned about the widening income gaps in this society - gaps that are already far greater than in comparable developed countries in Asia, let alone Europe.
The government's own forecast in the document makes it clear that income disparities would increase. Households receiving social-security assistance would be protected from adverse effects, but all others - except those currently in the higher tax brackets - would be worse off.
The document also makes the spurious claim that, with Hong Kong's ageing population and low birth rate, there should be less reliance on salaries tax - and therefore it should be reduced! That would help higher-income earners with dependants, but would do nothing to help the masses look after their aged dependants, or encourage couples to have children.
There are two fundamental arguments put forward for a GST: first, that the government needs more stable revenue sources; and second, that there is no viable alternative other than a much broader extension of taxes on income.