Opinion / Liang Hongfu
Hong Kong's tax base must not expand
By Hong Liang (China Daily)
Updated: 2006-07-25 09:04
It's too bad that we have to repeatedly visit this goods and services, or
sales, tax issue. Don't you get it? It's a bad idea for Hong Kong, born
out of desperation in an economic slump that is pretty much history by
now.
The entire concept of "broadening" Hong Kong's tax base was nothing more
than a textbook solution to the widening budget deficit, brought about
mainly by the collapse of the property market, which dragged the economy
through the mud. Academics love it because they don't need to do any
original thinking to make a sound theoretical case. Accountants support
it because they can see great opportunities for new business in an
increasingly complicated tax regime.
But the people of Hong Kong, especially those in the business sector,
should reject the idea. We must keep our heads cool and remain confident
that a low and simple tax system is best for Hong Kong.
Overeager government officials should listen to protests from the leaders
of the tourism and retail sectors, which stand to bear the brunt of the
proposed sales tax. They warned that such a tax could seriously undermine
efforts to promote tourism, which has become one of the fastest-growing
industries, thanks partly, at least, to the huge influx of tourists from
the mainland.
As reported in the local media, Travel Industry Council Executive
Director Joseph Tung Yao-chung said the tax would turn off tourists
because it would require them "to queue for tax rebates at the border or
airport for two or three hours."
Making the rebate at the shop is equally impractical, according to
industry experts. "Could you imagine hundreds of mainland visitors
surrounding a shop waiting for tax rebates? It might cause chaos at
shops," Tung was quoted as saying.
Latest government figures showed that more than 5.7 million mainlanders
visited Hong Kong in the first five months of this year, up 15 per cent
year-on-year.
We, of course, don't need travel industry experts to tell us that the
majority of mainland tourists come to Hong Kong mainly to shop. If you
make shopping a hassle for them, you stand the risk of losing them to
Singapore.
Knowing the flexibility of Hong Kong's business people, I can imagine
that if this tax is introduced in Hong Kong, many shops would relocate to
Macao to create a new shopping paradise for mainland tourists.
Clara Chong Ming-wah, executive director of the Hong Kong Tourism Board,
expressed concern that the complexity of the tax rebates mechanism could
turn away mainland tourists. She was quoted as saying by the local media
that: "The most important thing is to make it (goods and services tax)
simple and easy. It must be convenient for our tourists. We also do not
want to see prices of goods going up because of the sales tax, and we
also hope the proposed new tax will not bring any inconvenience to our
visitors."
Government officials have, at one time or another, indicated they were
fully aware of all the potential impact such a tax would have on Hong
Kong's tourism and retail sectors. It is obvious that much thought has
been given to facilitating the process of tax rebates.
But as Susanna Lau Mei-sze, general manager of Hong Thai Travel Service,
said: "It is mainly a psychological impact (on consumption) rather than
practical once there are tax rebates for tourists." Ms Lau told the local
media that in her experience while overseas, she had not received the
exact amount of tax paid, and had heard of people never receiving a
rebate despite filling in forms at shops."
The "psychological impact" of a sales tax, or any other new tax, would be
potentially devastating for Hong Kong, which has been known around the
world for more than 100 years as a "free" port, where the flow of goods,
except for a small number of controlled items, in and out of the city is
not subject to any form of restriction or tariff. For most Hong Kong
people, the only tax they know is income tax. And that's how it should
remain.
Email: jamesleung@chinadaily.com.cn
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