Motion Debate on "Opposing the introduction of a Goods and Services Tax " (19 October 2006)

MR JAMES TIEN (in Cantonese): Madam President, the world image of Hong Kong is well borne out by ratings of international rating organizations as the freest economy in the whole world, hitherto noted for its simple and low tax regime. And, our profits tax is not progressive in nature, and there are no such taxes as dividends tax and capital gains tax. How can all this be possible in Hong Kong? I think the reasons are that the Hong Kong Government has been upholding the policy of "small government, big market", that we do not have to incur any expenditure on national defence and diplomacy, and that there is no need for us to hand over any of our revenue to the Central Authorities.

Therefore, when reviewing our tax regime, we are not bound to adopt policies practised in other countries. We should not follow what Dr David LI advocates in his amendment ─ he has now left his seat thinking that it is just because something is advocated by foreign experts, then we must follow suit. On the introduction of a sales tax, the Government has repeatedly asked us, "If a sales tax is not imposed, where can we get the money?" Actually, the introduction of a sales tax mainly involves two issues. The first one is the Government's claim that our tax base is narrow. The second is the ageing of our population. However, I think the most important issue does not lie here. Whether or not the tax base is really narrow, we can always hold further discussions to find out the answer. As for the ageing of our population, there is still time for us to sort things out. Therefore, the most important thing for us to consider now is whether there is enough money to cope with our expenditure. If the Government really cannot make ends meet now, then as responsible political parties or Legislative Council Members, we must of course help the Government solve the problem. But if the Government already has enough money, why should we still have to give consideration today?

Madam President, let me refer to the table listing the sources of government revenue to find out whether or not the Government has enough money. In 2005-2006, the sources of government revenue were $70 billion from profits tax, some $40 billion from salaries tax, $2.9 billion from land premiums, some $14 billion from rates, $17.9 billion from stamp duties and $11.9 billion from betting duty. We can see that all these sources of tax revenue are very stable, except that we have not seen the return rate of the Exchange Fund. In 1997, our Exchange Fund stood at $650 billion only. But it has increased to $1,100 billion by now. The average return rate up to this moment is 6.6%, meaning an amount close to $70 billion. We are of the view that if the Government can allocate this entire sum of $70 billion for use, rather than just allocating an average of roughly 30% of it as before, there will be an extra $40 billion at our disposal. On the basis of all these figures, I can say that the Government does not have to worry about where to get the money for meeting its annual expenditure.

The Government frequently says that we must save and prepare for rainy days, and that political parties must not behave like ostriches, so a sales tax must be introduced. However, although Hong Kong is just a place with a population of 7 million, the Government already possesses $1,100 billion of reserves and also the Exchange Fund. Our ranking is just next to Singapore, which has a population smaller than ours. I think there is no need for the Government to worry about any lack of money. If the Government still says so despite this $1,100 billion, I believe many people will feel that our Government is simply a miser who is so obese that it cannot even pull on a sock. People will probably think that after fondling with the money in its left pocket, it would still say often that since the money does not belong to its right pocket, it is still short of money.

The Government frequently claims that the Exchange Fund should be used for defending the Hong Kong Dollar. But even the Government itself has admitted that some $200 billion will be enough for the purpose. And, we in the Liberal Party is not asking the Government to spend all the $1,100 billion either. We are simply saying that it should be enough to allocate all the investment return of $70 billion for use. And, there is no need for any continuous expansion of the $1,100 billion anyway. We will then spend about $200 billion a year, and the $1,100 billion will be enough for Hong Kong to last the rainy days. What is more, since the reunification nine years ago, there has been a discrepancy between the closing balance and the revised estimate every year, ranging from $1.3 billion in 1998-1999 to $11.6 billion in 1999-2000. And, the discrepancy has invariably been due to the Government's underestimation of the closing balance rather than the revised estimate. While I think it is of course important for the Government to be prudent, but should it be prudent to the extent of intimating us, making people think that it is crying "wolf" all the time?

Madam President, I also want to discuss the issue of our narrow tax base. The Government claims that since there are 7 million people in Hong Kong and only 1.2 million people out of the 3.4 million working population have to pay salaries tax, the tax base is narrow. There is no doubt that these 1.2 million taxpayers pay as much as $37.5 billion in salaries tax. But the rest of the common masses also pay other taxes, as much as $14 billion in rates, $29.8 billion in stamp duties and betting duty, $14.5 billion in 3 000 government fees and charges and some $10 billion in various duties levied on commodities such as tobacco, alcoholic beverages and vehicles. And, coupled with the $70 billion mentioned just now, I therefore believe that although some people do not have to pay any salaries tax, they must still pay other forms of taxation. Therefore, on the issue of whether our tax base is really narrow, we can still discuss further.

I also wish to say a few words in response on the topic of ageing population. According to the Government, the number of people aged 65 or above was 84 000 in 2005. By 2033, that is, 27 years from now, the number of people in this age group will be 2.24 million. Therefore, something must be done. The Liberal Party agrees entirely. However, we are of the view that the main problem faced by senior citizens is related to health care. In that case, can we actually try to tackle their health care problem by means of health care financing or other arrangements? If yes, then we will be able to solve the main problem faced by senior citizens. The small number of remaining problems which are brought about by increases in the elderly population, and which the Government must solve, are simply welfare issues. I observe that at present, only about 200 000 out of the 1.1 million elderly people are in receipt of Comprehensive Social Security Assistance (CSSA). This means that not every senior citizen is in receipt of CSSA. What is more, there is still 27 years to go before 2033 and it will take only two or three years to implement a sales tax. Therefore, we can actually discuss the introduction of such a tax at a later time.

Lastly, Madam President, the Liberal Party wishes to point out that we would support Dr YEUNG Sum's original motion because public opinions are clearly against the introduction of a sales tax. Dr YEUNG Sum's original motion, however, does not ask for the cessation of consultation. I have stated clearly at the very beginning that in view of the clear opinions of the public, the Government should really stop the consultation exercise lest it should become the target of criticisms. However, the Government has turned down my well-intentioned advice. This is fine with me. Just let it continue to be the target of criticisms. It may as well continue with the consultation exercise until March next year. Therefore, we will support Dr YEUNG Sum's original motion.

Finally, Secretary Frederick MA said we were aiming for votes, but I think we are just standing up for our constituents in the various industries. If the Secretary fails even to understand this point, he may really be a bit naive. Thank you, Madam President.