Hong Kong government must change the way it taxes property
The lump-sum land-premium system should be replaced with a scheme whereby rental income is collected from leaseholders
In his budget speech earlier this year, Financial Secretary John Tsang Chun-wah painted a grim picture of Hong Kong's economic future, and of the outlook for the government's finances.
"With an increase in the number of the elderly, a shrinking working population, reduction in the number of taxpayers and decelerated economic growth, I expect that the growth of government revenue will drop substantially if our tax regime remains unchanged," he warned.
"Meanwhile, expenditure on welfare and health care will soar. We may not be able to make ends meet."
The government should [be] collecting revenue over the whole lifetime of property projects
Tsang quickly ruled out plugging the gap by drawing down the government's accumulated reserves, which if you include the exchange fund's accumulated surplus and the sums squirrelled away in accounts like the lotteries fund, now amount to some HK$1.5 trillion.
"Recurrent expenditure must be funded by sustainable revenue," Tsang declared, saying he would set up a committee "to explore ways to make more comprehensive planning for our public finances".
Many observers concluded that Tsang was paving the way for another government attempt to impose a goods and services tax on the city.
But there are far better ways to retool Hong Kong's revenue regime to meet the demands of future health and welfare spending than hitting the population with a tax that it has already been rejected once before.
One obvious way would be to change the way the government raises money from Hong Kong's property market.