The marches of the Coalition Against Sales Tax reflect the depth of feeling surrounding the opposition to the introduction of a goods and services tax in the business sector. The Business and Professionals Federation has many members from the business community, yet it holds fast to its support for the principle of tax reform. It is vital that there should be a rational and unemotional debate on this subject.
Some businesspeople do not see how a narrow tax base concerns them. Some even suggest that, instead of adopting a GST, we should raise the profits tax, which now accounts for almost 36 per cent of the government's total tax revenue.
Raising the profits tax rate would simply target the same sectors of society that already contribute the most tax.
The government estimates that a 5 per cent GST could bring in revenue of HK$20 billion. To raise a similar amount, the profits tax would have to jump by 5 per cent - to 22.5 per cent.
Surely this would not be wise when Hong Kong is only just emerging from an economic downturn. Our competitiveness would suffer, and it would go against the international trend towards reducing profits and personal income taxes.
In the past decade, the countries of the European Union have reduced their average corporate tax rate by 10 percentage points. In some places, the corporate tax rate is even lower than Hong Kong's 17.5 per cent: it is 12.5 per cent in Ireland and 12 per cent in Macau. Put simply, there is no room to raise direct taxes if we are to retain, let alone attract, international capital and talent.