People's knowledge of sales tax 'misjudged'

Linda Choy

Government overestimated the public's understanding, says financial secretary

Financial Secretary Henry Tang Ying-yen said yesterday the government had overestimated the public's understanding of the goods and services tax when it launched its consultation in mid-July.

Mr Tang also expressed disappointment with the reaction of some political parties and business groups who, he said, gave their views without studying the consultation in detail.

His remarks came as the government prepares to adjust its approach to consultation on the controversial tax. About 800 submissions have been received.

'We overestimated society's understanding of the topic. Hong Kong people are such frequent travellers that we thought they should know the topic reasonably well. Apparently, this is not the case,' Mr Tang said. He was referring to the public outcry after it was revealed the tax would cover not only goods but also services.

Mr Tang also took to task some political parties and business groups for calling for exemptions, despite suggestions in the 89-page consultation document that it would make the system complicated and inefficient, and increase compliance cost.

The proposed tax ran into heavy opposition with the launch of the nine-month consultation. Among the most vocal critics have been members of the Liberal Party, Mr Tang's old party before he joined the cabinet. Liberal Party lawmaker Vincent Fang Kang also chairs the Coalition Against Sales Tax.

Mr Tang said the government would outline its latest thinking on the GST consultation at a forum organised by the Business and Professionals Federation of Hong Kong on Friday.

Officials will now seek to build a consensus about the need to broaden the tax base and put forward other options alongside GST for the public's consideration. The government has cited the narrow tax base as a reason for bringing in GST.

Out of a working population of 3.4 million in the city, only 1.2 million pay salaries tax. The top 100,000 salaries-tax payers contribute 60 per cent of the tax.

The top 800 companies pay 60 per cent of the total profits tax.

A study four years ago by the Advisory Committee on New Broad-based Taxes identified a GST as the way forward. Despite the report, the public had yet to form a consensus on the topic, Mr Tang said.

He said the government could face new spending requirements related to an ageing population and expanding tertiary education, requiring a broader tax base than the current one.

But Mr Tang said he did not foresee new demands on government spending within the next five years. With a vibrant economy and low unemployment rate, now was a good time to discuss the tax.

'It is time to begin in-depth exploration into the subject,' he said.

Mr Tang believed the public would form a consensus about broadening the tax base, citing internal public opinion polls which found more than 50 per cent of respondents in support.