Hong Kong Budget Forum
The Better Hong Kong Foundation held a Hong Kong Budget Forum immediately following the Budget Speech by the HKSAR Government’s Financial Secretary. Five experts from various sectors were invited to comment on the government’s financial blueprint for the year 2000/2001. The experts included: Professor Richard Wong, Director, School of Business, The University of Hong Kong; Professor Fan Yiu Kwan, Dean, School of Business of the Hong Kong Baptist University; Mr. Marcellus Wong, Partner, Tax Services, Arthur Andersen; Mr. Francis Lau, Executive Secretary, Chinese Manufacturers’ Association of Hong Kong; and, Mr. Wong Kwok Hing, Deputy Director, Social Affairs Committee, Hong Kong Federation of Trade Unions.
Professor Wong said, “The long term development of the Hong Kong economy relies on grasping economic opportunities and in dealing with long-term issues such as the globalization of the economy, economic transformation, development of information technology and the impact of the business environment.” Professor Wong also agreed with Mr. Tsang’s suggestions of strengthening labour training and education.
As to the plan of reforming the financial system and the introduction of a US dollar clearinghouse, Professor Wong considered it a creative idea that would help strengthen the position of Hong Kong as an international financial centre.
Professor Wong explained that “a US dollar clearinghouse would help save time for currency exchange, especially H-share companies which intend to list in the US and which already use HK dollars to raise capital locally. It would also protect investors if for any reason the HK/US dollar peg became unstable.”
He also praised Mr. Tsang’s commitment of reviewing the entire tax system, but warned of the possible danger that if the review results favoured the taxing of internet activities or taxing income out of Hong Kong it would seriously affect economic and investment initiatives. He stressed that “a narrow tax base was not a problem, but the question was whether there were adequate measures to recover tax and deal with the instability in an economic cycle.”
Professor Fan also welcomed the establishment of a US dollar clearinghouse. He explained that “such mechanisms. in the Asian region only currently exist in Japan. The introduction of this in Hong Kong would strengthen the territory’s position as a major financial centre in Asia.”
As to the tax review plan, he thought the government should not only be considering adding new taxes, as “the introduction of a sales tax was a large move which would have implications on economic resources, high opportunity costs and little gain for the economy.” Rather, he felt that, “the government should look for ways to improve existing tax, such as rates which already have a wide base. As it is already in existence it would not require further examination by the Legislative Council.”
Mr. Marcellus Wong, also Past Chairman of the Taxation Association said that, “this was not the first time Mr. Tsang used the approach of ‘suggesting little'”. He pointed out that the budget failed to provide plans to respond to the economic opportunities created by the globalization of the economy and to help small and medium enterprises face the transformation.
He suggested the government should learn from countries such as Singapore and India, and provide SMEs with tax relief to develop e-commerce to help them adapt to the changing economy.
In the area of a tax review, he disagreed with the government’s plan to have an internal body to review the tax system while also setting up an independent committee to examine new tax methods. He thought the work should not be split into two and should be done by the independent body alone.
Mr. Lau welcomed the government’s establishment of the new Innovation and Technology Commission and the renaming of the Trade Department to the Industry and Trade Department. He noted that “Hong Kong manufacturers have always confused the Industry Department and the Trade Department. The merging of the two departments would definitely help solve manufacturers’ problems more effectively.”
Mr. Wong Kwok Hing, who represented workers’ benefits, also welcomed the government’s move of reviewing the tax system. He said, “apart from examining ways to widen the tax base, the government should consider the ‘vertical fairness principle’. For example, the more a company earns, the more it should contribute.” He disagreed with Mr. Tsang’s view that this would force large companies to split into smaller ones to avoid tax, adding that “the government should be able to introduce measures against it”.
He also noted that the Budget lacked suggestions to help people who were relying on social security to find work and to assist SMEs in facing the changing economy. He hoped the government could set up an employment board to coordinate employment issues.
The suggestions made in the Forum have been directed to the SAR government for their consideration.
2000.03.01
