Parties unite to reject GST proposal

Government to continue public consultation on the new levy despite overwhelming opposition in Legco

Major political parties last night joined in rejecting the government's proposed goods and services tax (GST), saying it was an unnecessary levy which would damage economic recovery and hurt the poor.

In a rare show of unity, the Democratic Alliance for the Betterment and Progress of Hong Kong and the Liberal Party voted in support of a non-binding motion lodged by Democrat Yeung Sum to state opposition to the levy, which was put forward by the government for public consultation on July 19. Dr Yeung's motion was carried by 17-2 votes in the functional constituencies and 23-2 in the geographical constituencies.

Executive councillor David Li Kwok-po moved an amendment, calling for room to explore ways of expanding the tax base but this was voted down.

Speaking in support of Dr Yeung's motion, lawmakers said Hong Kong's international standing as a city with a simple and low taxation system would be undermined, and foreign investments would be deterred if the plan went ahead. 'The government is selling a very bad product with very bad sales techniques. The poor will get poorer under this regressive tax,' Dr Yeung said.

Lawmakers were also unconvinced that, given the clear public opposition since a consultation exercise was launched in July, the government should continue to push for the unpopular tax until the consultation period ends in March. James Tien Pei-chun, chairman of the Liberal Party, said the government's assets, including the exchange fund and the fiscal reserves, were worth HK$1,100 billion and that it would be unnecessary to change the present simple and low taxation system, a move which would deter foreign investors.

But Mr Li said there was a need to address issues such as a narrow tax base and pressures by the International Monetary Fund. 'This council must not simply reject the consultation, and leave crucial questions unanswered.'