Bury the GST proposal, now (24 August 2006)

There is nothing new or surprising about the sight of people demonstrating in Hong Kong. Look around the city and you'll find groups protesting against some issue, somewhere, almost every weekend. But there was something distinctly different about the march against the proposed goods and services tax on August 6.

It wasn't the size of the protest - about 6,000 - that made it unusual. What made this march different were the kind of people who took part, and the cause that united them on a sunny Sunday morning. There were no seasoned activists, left-wing agitators or returning political exiles leading the way. Instead, there were business owners, estate agents, jewellers and shopkeepers marching shoulder to shoulder with young couples, families and the elderly.

They were marching not for any political motive but to voice their opposition to a tax that they all fear will do grave harm to Hong Kong. They were the kind of people whose quiet industry and deep-rooted sense of responsibility has shaped Hong Kong's success.

There can be no doubt now that the people of Hong Kong oppose, and oppose vehemently, the proposal for a GST. Furthermore, the tide of opposition is gathering strength by the week.

Surveys conducted by the Liberal Party have found that the percentage of people opposed to the tax has risen from 58.9 per cent, before the consultation period was announced, to more than 68 per cent today. The more people consider the implications, the stronger their antipathy becomes.

Those who marched on August 6 feared that a GST would have a profound impact on their shops, restaurants and businesses, saddling them with an additional 5 per cent burden - plus huge administrative and manpower costs - that they cannot afford to pass on to their customers. They know from visiting overseas countries that when a GST arrives, it stays and it grows: look at Europe, where an initial tax of 5 or 8 per cent has now climbed to between 15 and 25 per cent.

The International Monetary Fund believes we need a GST, but its officials fail to understand Hong Kong's situation. We have a huge fiscal reserve and the Exchange Fund - a reserve to back the city's currency - totalling over HK$930 billion. With no national defence or foreign diplomacy budgets, we have fewer financial pressures than other places, like Singapore, where a GST has been introduced.

Among the three fiscal targets set by Financial Secretary Henry Tang Ying-yen in his 2005-2006 budget was cutting government spending to 20 per cent or less of the gross domestic product. If this target is realised, there would be no budget deficit and no need to seek new streams of revenue.

Consider our huge fiscal reserve, the annual investment return on the Exchange Fund and a continuing programme of sensible cost cutting. With those strengths, I believe our current tax system can sustain our medium-term budget requirements for new spending on youth, medical, welfare and elderly issues. I see no need to broaden our tax base from 1.1 million to 7 million people through a GST.

Mr Tang has a broader duty not to introduce a GST: namely, the Basic Law says the government should keep its expenditure within revenue limits, rather than spending first and then seeking a new revenue source to balance the budget.

Grave illnesses require grave remedies, but this is a case in which the need to operate at all is in question. The businesspeople who drove our recovery realise this. The citizens who marched on August 6 realise this.

The government must listen to the voices of the people and withdraw its misguided proposal now, to dispel a cloud of uncertainty that would otherwise loom over us for the remainder of the nine-month consultation.