Hong Kong still sweeter than Singapore's chocolate bait

In 1984, his nightmare novel of life under a ruthless totalitarian state, George Orwell described how grateful workers demonstrated in the streets to thank the government for raising their chocolate allowance when in fact the state had cut the weekly chocolate ration by 10 grams to just 20 grams each only one day earlier.

Something similar happened in Singapore this week.

On Monday, the Straits Times Index leapt 2.4 per cent after maximum leader Lee Kuan Yew said the government planned to cut Singapore's corporate tax rate by 'at least' one percentage point from 20 per cent.

Local pundits promptly praised the move as boosting the little republic's economic growth potential and enhancing its attractiveness as an investment destination, especially compared with Hong Kong.

Amid all the celebration, some seemed to forget that the proposed corporate tax cut is intended to offset an increase in Singapore's goods and services tax, which is to go up to 7 per cent this year from 5 per cent.

In fact, a one percentage point cut in corporate taxes would offer only a partial offset. According to Mr Lee, the reduction will cost the government roughly S$400 million (HK$2.03 billion) a year in lost revenues. In contrast, the GST rise is expected to raise an extra S$1.5 billion.