Hong Kong's economy made a robust recovery last year, propping up both the stock and property markets. Revenue generated from stamp duty and land sales has significantly exceeded expectations, up to the third quarter of this financial year, boosting the budget surplus to HK$59 billion. The surplus for the whole year is forecast to reach HK$70 billion, bringing the amount of accumulated surplus to a whopping HK$600 billion.
With such a large surplus, it is understandable that there are more calls for budget handouts to ease inflationary pressures and tackle the worsening wealth gap.
We should be open to suggestions on how to broaden our tax base. I am not against the government seeking out new tax options, such as expanding the scope of the progressive tax structure. In fact, the introduction of additional stamp duty last year to curb property prices and speculation is effectively a form of asset appreciation tax to enlarge our revenue base.
But, in the midst of these critical voices for change, some academics proposed that the government should introduce a land appreciation tax to make the tax system more fair and efficient. This suggestion has not been thought through and we should not take it too seriously.
Land scarcity has created the perfect breeding ground for soaring house prices, and land sales are a major source of revenue for the government to finance capital works projects. The government charges a premium for all types of land for sale and redevelopment, whether it is through the application list system or land auctions. So, in a way, there is already a form of land appreciation tax embedded in the system, a main cause of high land prices, on top of restricted provision of affordable housing.
Another misconception, which is being widely circulated, is that the stock exchange urgently needs to expand by merging with other exchanges, following news last week that the London Stock Exchange was in talks to merge with Toronto's TMX exchange. The merger will potentially create the world's dominant mining and energy company bourse and the world's fourth-largest exchange.