Letters | Hong Kong property: raising tax rates on rental assets is unfair

Rental properties are retirement funds for many Hongkongers, given the city’s meagre Mandatory Provident Fund returns and lack of pension

If retirement assets are to be taxed, should the government consider taxes on MPF, bank savings, stocks and bonds holdings as well to be fair?

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Residential buildings seen at sunset in Tseung Kwan O, Hong Kong on August 14. Photo: Sun Yeung

Published: 6:45am, 2 Mar 2021Updated: 6:45am, 2 Mar 2021

The idea of raising rental property rates from the current 5 per cent to as much as 15 per cent under a progressive model hurts Hong Kong retirees, the middle-class and the poor alike.

The active rental market serves a social purpose due to the high property prices. It enables the younger generation to rent, save money and start a home. Many prefer to rent rather than buy a costly flat. Raising the overall rental cost will hurt the people we are trying to help.

Rental properties are retirement funds for many Hongkongers, given the city’s meagre Mandatory Provident Fund returns and lack of pension. When banks pay zero interest and the stock markets remain volatile, many retirees wisely invest in a rental property as their pension. Despite its low yield, it is considered a “safe” and inflation-hedged asset. If retirement assets are to be taxed, should the government consider taxes on MPF, bank savings, stocks and bonds holdings as well to be fair?

In addition, rental properties are already doubly taxed under government rates and rental income tax, while most Hong Kong companies pay only profit taxes. Should the government also consider taxing company gross assets too? It is unfair to tax one type of business doubly but not others.

To its credit, in recent years, the Hong Kong government has succeeded in eliminating short-term property speculation by imposing a massive 15 per cent stamp duty on second purchases and a capital gains tax on short-term trading. There is almost no unchecked speculation in the Hong Kong rental market. Rental rates have sharply declined in recent months in line with the economy, as they have been adversely affected by the pandemic, protest activities and outward migration.

The government should instead consider raising taxes on the top 1 per cent, some of whom pay no tax on dividend income and capital gains, versus the remaining 99 per cent paying up to 17 per cent in salaries taxes. This is more in line with the global trend, too.

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Letters | Hong Kong property: raising tax rates on rental assets is unfair