Singapore-style budget reforms far too taxing for Hongkongers

Hong Kong's political elite may secretly admire Singapore's brand of government. But they are looking at apples and oranges.

Singapore means big government. Its citizens accept and expect it will take care of them. Hong Kong ideologically stands for small government, with all the good and negative consequences that flow from it. Almost every attempt by the post-handover government in Hong Kong to expand its tentacles into the commercial, technological and private sectors has gone nowhere.

I make no judgment on whether big or small government is better. But once you are locked in, it's difficult to adopt the other's policies piecemeal without fundamental revamp. What I find fascinating is that both cities face very similar problems: rising costs of living, ageing populations, income inequality and slowing growth. But the way in which we address or fail to address them very much reflect our different mindsets about what government is and what it should do.

This week serves as another occasion to cite the two leading Asian cities in the same breath, as they released their respective annual budgets. Much has been made about the differences in approach between the two. Singapore's budget was billed as "Robin Hood-like" by raising taxes on the rich and redistributing to the less well-off in social services. But it only affects the top tier - about 5 per cent of taxpayers - and means they pay 22 per cent instead of 20 per cent of income.

The wealthy elites in most developed economies would die to pay 22 per cent tax.

According to a global tax survey by KPMG, the effective tax rates are: Belgium (47 per cent), Italy (45.2 per cent), Germany (43.8 per cent), France (42 per cent), Britain (31.4 per cent), Japan (28.3 per cent) and the US (26 per cent). Hong Kong's stands at 12.8 per cent. And these are effective tax rates, so their nominal rates can be much higher.