‘At last, serious action on Hong Kong’s competitiveness, but shrinking workforce is a huge worry’
Shirley Yuen welcomes tax measures announced in the budget and says the financial chief was right to resist the urge to dole out more treats
As far as budgets for caretaker financial secretaries go, Paul Chan should be applauded for doing a reasonable job in his maiden, albeit possibly last, budget address.
He didn’t go mad and try to win popularity points by handing out treats to the public or to business. He tried to be inclusive in giving some taxpayers’ money back to the public. This was a sensible decision because at the end of the day there is only so much any outgoing administration can do. Also, it would have been irresponsible to empty the coffers needlessly.
From the business community’s perspective, it is a relief to see that the government is finally taking steps to seriously examine Hong Kong’s competitiveness by acting on our idea, submitted year after year, to set up a tax policy unit. This is important because a low and simple tax regime is not enough.
We need a policy framework that also enables Hong Kong to compete meaningfully, and we need to dedicate resources accordingly to drive these changes. At the same time, we need to remind ourselves that other economies have already implemented or are planning to roll out very attractive tax measures. We, on the other hand, are just setting up a unit to study what we need to do. Needless to say, we have some catching up to do.
The Hong Kong General Chamber of Commerce has been asking the government to examine as a matter of urgency our proposal for a two-tier profits tax to help start-ups and small businesses, as well as an R&D tax rebate.
We are confident that these two proposals would encourage more young people to start up a business, and in turn drive the new innovation and technology sectors. This is crucial, because we will rely more on new sectors like these in the coming years to be the engines of economic growth.
By offering HK$35.1 billion worth of tax cuts and other short-term relief measures, people from all walks of life will benefit from this budget. Support for traditional sectors, such as tourism-related businesses, will no doubt be welcomed. But as the financial secretary pointed out, we need to invest in new areas of growth and support start-ups, particularly in the fintech fields. This is where the HK$10 billion for supporting IT development, and also leveraging IT to develop Hong Kong into a smart city can be wisely spent.
The financial secretary was bashed at the post-budget press conference for not handing out treats or doing more to help those in need. If you look at the numbers, recurrent expenditure on social welfare has increased by 71 per cent in the past five years to HK$73.3 billion in 2017-18. That is a huge amount of money, and we are pleased to see that progress is being made in this area.
However, we are not seeing as much generosity or progress towards tackling our acute manpower shortage.
By the government’s own projections, our labour force will start shrinking in less than 10 months. The construction, elderly care, hospitality and other service sectors are already having to contend with too few hands to do the work on hand. Obviously, as more baby boomers start to retire in 2018, the shortage is going to get worse.
Increasing expenditure for capital works projects to HK$86.7 billion will benefit Hong Kong’s economy and population overall, but we cannot see where the labour is going to come from to support those projects. Similarly, we do not know where the labour and skills for the emerging innovation and technology sectors are going to come from.
We cannot say we were caught off guard by these challenges. We have been talking about our shrinking labour force and competitiveness being chipped away for years. It is way past time that we started implementing polices to address these challenges.
Shirley Yuen is CEO of the Hong Kong General Chamber of Commerce