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Jimmy Cheung

Good medicine is often a bitter pill, says chief executive

Chief Executive Donald Tsang Yam-kuen  yesterday broke his silence on the controversial goods and services tax (GST), calling it 'the most practical' option to ensure a stable source of public revenue.

He also challenged those who opposed the tax to come up with 'sustainable alternatives'.

'The government could, of course, hide its head in the sand, pretending not to see the clear and present challenges that Hong Kong is facing,'  Mr Tsang said. 'Taking a short-term view, doing so could even help the popularity of the government.'

But he said the administration had to formulate policies that could serve the interests of Hong Kong instead of going after the most welcome policy.

'People who oppose a GST owe it to the public to put forward sustainable alternatives to resolve these problems,'  he told reporters after the first meeting of the Executive Council following the summer recess.

'Good  medicine often comes as a bitter pill.' He said he understood that widening the tax net and broadening the tax base would  never be universally welcomed, but 'the government should never refrain from doing the right thing even though it is unpopular. Evasion is never a way out.'

He said Hong Kong  faced three fundamental challenges that made the introduction of a wider tax base necessary. First, with accelerating globalisation and an unavoidable cycle of boom and bust, the community had to be fully prepared for  crises or slowdowns.  Second, the population  was ageing and, third, spending on social welfare, education and medical services, which used up 60 per cent of public expenditure, would only continue to grow.

He said the government  would continue to explain to the community the compensation packages for those on low incomes and for recipients of comprehensive social security assistance,  and proposals on how the additional revenue to be generated by a GST would be  spent.

But  Mr Tsang's support for a sales tax did not seem to  change the stance of political parties.

Liberal Party chairman James Tien Pei-chun  said Hong Kong's income was not really volatile.

'In the 2005-06 budget year, the government received  around $50 billion  through property, investments and other means. We have charted these other incomes for the past nine years and they have been pretty steady.'

He said that unless there was an imminent financial crisis in the next three years, there was no need for the government to  use a GST to solve the ageing problem, which was expected to  have an effect only in 20 years' time.

Democrat Sin Chung-kai    reiterated the consensus of lawmakers to increase the sharing of the profits generated by government reserves, which fall  under the Exchange Fund account. His party believed that Mr Tsang's comments were just political tactics and said  the party had been proposing alternative suggestions all along.

A  member of the Fair Tax Alliance, trade unionist Lee Cheuk-yan, said it was a shame  the government could not  put together a comprehensive package, and  instead call on politicians to provide one.

Meanwhile, a University of Hong  Kong survey showed an increase in people's confidence in Mr Tsang, from 64 per cent in late August to 69 per cent last week.

The university's Public Opinion Programme director, Robert Chung Ting-yiu,  said Mr Tsang's support rating had increased after the debate over the unpopular goods and services tax had settled down.

Financial Secretary Henry Tang Ying-yen's  confidence rating also  recovered, by two percentage points to 52, but still  below the 69 per cent he attained before the GST consultation was launched in July.



Tsang supports GST as 'most practical option'