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Jake Van Der Kamp

'Foreigners are invariably amazed to learn that, in Hong Kong, only about 17 per cent of the populations pays tax ...

'Western academics have warned about the pitfalls of representation without taxation. Voters become more responsible and more restrained in urging welfarism when they recognise that, at the end of the day, they have to pay the costs.'

Regina Ip Lau Suk-yee,

Column in SCMP, August 6

Let's get some facts in perspective here because when you come to the end of a Regina think piece you often have to give your head a shake so that the whole world doesn't continue looking like one of those Picasso cubist art paintings.

Start with the 'only about 17 per cent of the population pays tax'. I have to assume that what she means here is salaries tax and I actually make that figure as  more than 19 per cent at present.

But how can a government hit someone for an income tax if he or she doesn't have an income? Are babies tax cheats? This figure should be calculated as a ratio of the employed population, which is almost exactly half of the total population. Regina's 17 per cent thus becomes 34 per cent, although I make it  more than 38 per cent.

Admittedly, even 38 per cent would be low and I must say I am of Regina's mind on these matters. Far better to spread the tax burden widely. Let everyone pay at least a little bit.

But this brings up another matter of perspective. Salaries tax in the last fiscal year accounted for only 13.4 per cent of total government revenue, which is tiny. Corporate profits tax brought in almost twice as much. In the United States, individual income tax accounts for 45 per cent of federal government revenue.

So, if only 13.4 per cent of government revenue comes from salaries tax, then 86.6 per cent must come from other sources and we are left with the question of whether this burden is spread more widely than is the salaries tax.

In some ways, it obviously is. Betting and tobacco taxes are taxes on lower income groups. These are relatively insignificant revenue sources, however. Far more important are corporate taxes and land sales revenue, which, you may say, are largely taken from higher income groups.

But are they? Take the lot of public housing tenants, for instance. Their rents are so low that they live in some of the cheapest urban accommodation on earth. Their health-care bills   are met mostly from the public purse, as are the education bills for their children and there are few services for which they pay anything close to real cost. Yet very few if any of these people pay any salaries tax.

Employers know this too, which is why many of these people are poorly paid. They don't need much money to survive after all the public subsidies that they get and, surprise, surprise, they are then not paid much money.

Public social spending has thus turned effectively into an employment subsidy for the benefit of employers.

On the surface, it may therefore appear that public housing tenants contribute little to the costs of government. In actual fact, the money is taken from them and paid to the public purse through other roundabout channels. In the end, it is still they who carry the burden of the tax.

I would argue that this is always so, that when you divide economic returns into returns on capital and returns on labour, you find that returns on capital are determined by such things as the prevailing yield structure of the economy and the risks to that yield structure. If it is not so, the money just flees abroad to a better yield for the risk.

It is always from the returns on labour that the costs of the public sector are borne. The working people carry the load in the end, whatever means have evolved to make them carry it and Regina's essential thesis is wrong. The problem we have here is not representation without taxation but taxation without representation.

Even if this were not so, however, it is a good a question whether representation should be based on share of assets rather than share of opportunity. A bricklayer may own little more than the clothes on his back but he does have his life and that gives him a very big stake in his society, just as much as the plutocrat who also has only one life.

This is the underlying principle behind one person, one vote. Equality of opportunity, the even chance to do as much with your life as the next person can, counts for more in representation in government than the assets you have amassed.

I shouldn't have to point out these very obvious classroom lessons of social responsibility to someone who for a period held senior government office in Hong Kong, but it seems that I must.

Regina, I challenge you. Find me this big bloc of voters who are so unrestrained in urging 'welfarism'. I wonder whether you know your own people.



Our problem is taxation without representation