MR CHAN KIN-POR (in Cantonese): The middle class is a pillar of strength in Hong Kong. They make considerable contributions to society but get little in return. In the past when the economy was good, the middle class just worked quietly, and sought to resolve their own problems themselves. But now, with the social and economic environment deteriorated, the burden weighs increasingly heavy on the middle class who suffer also from a severe loss of chances for promotion or pay rise. Hence, we see quite a number of middle class people complain in recent years, grumbling that they can hardly make ends meet despite earning $50,000 or $60,000 a month, and hope for government help. Quite a number of others who do not understand their cause of complaint wonder why a monthly salary of $50,000 or $60,000 are just enough to live on. But we can actually do an guesstimate on their expenses. Middle-class families do have their own way of life. They are not eligible for public rental housing or flats provided under the Home Ownership Scheme, and hence are paying heavily for housing. Usually, both husband and wife are wage earners who cannot cut down the costs of going to work. Spending on their children’s cost of living, tuition fees and wages of domestic workers also takes up a sizable portion of their incomes. The middle class very often do not like to use public hospital service, and hence a majority buys medical insurance. On top of these, they have to support their parents financially and pay tax. All these items add up to a large sum, while spending on entertainment and other non-essential items, such as travel and car purchase, have yet to be included in the calculation. Therefore, middle-class families do have their reasons for complaints.
Honestly, government policies have previously focused on poverty alleviation of poverty as its core and the Government has paid little attention to problems facing the middle class. Before the reunification, the Government encouraged the middle class to resolve their own problems. At that time, the economy was accelerating swiftly and the middle class enjoyed abundant chances for upward movement. The return on investment was also way better than it is now. Hence, the middle class did have their own ways to handle problems independently. After the reunification, however, a lot has been changed with regard to the world economy. As our economy matures, we see a huge reduction in upward mobility and a poorer return on investment. With the persistent hike in property prices and rent, the middle class find themselves in an increasingly difficult situation. The relief measures provided by the Government for the middle class, such as tax rebates and rates reduction, have achieved very limited results.
The middle class already feel aggrieved over a lack of welfare benefits for them. Adding to their woe is the heavy tax that burdens them. Of course, if we are just talking about salaries tax, the tax rate in Hong Kong is indeed lower than that in Europe and the United States. However, when comparing with the grass roots, the tax rate levied on the middle class is much higher. And when comparing with the wealthy class, the burden on the middle class is obviously a heavier toll. Furthermore, the middle class has to pay indirect taxes, especially those related to properties, such as rates, Government rents, stamp duties, property taxes, and so on. Under high property prices, the middle class is in a way made to pay heavy land tax when buying or renting flats. Meanwhile, middle-class drivers have to pay high licence fees and fuel duties. Therefore, these direct and indirect taxes add up to a heavy burden on the middle class, despite the practice of a low tax regime.
Hence, we see the reasons behind the growth of middle class grievances. I support the setting up of a middle class commission for a comprehensive review of middle class policies so as to create for them a fairer environment and help channelize their discontent. One of the major items for discussion, I suggest, is that as the middle class cannot enjoy welfare benefits in housing or elderly care, and some of them do not even use public health care and education services, the Government should consider giving them targeted welfare benefits. I propose providing them with tax deduction for insurance contributions.
It is common among the middle class to acquire life insurance, retirement protection and medical insurance, in preparation for their future. If the Government puts in place tax deduction arrangement with regard to contributions to life insurance, medical insurance and retirement annuity schemes, the middle class will be benefited directly. And the Government is not actually going to face a huge loss, as the small amount of tax revenue foregone can serve as incentive for the middle class to prepare for their own future, thus reducing their prospective reliance on the Government. This is an investment that promises a huge return.
The Government has also announced the specific direction for the Voluntary Health Insurance Scheme (“VHIS”) and the detailed proposal will be announced later. Provided with tax concessions, VHIS targets the middle-class people. However, it may suffer from a limited appeal as the $50 billion subsidy mentioned earlier and the High-risk Pool will be missing out. Therefore, I hope the Government can provide better economic incentives, more appealing tax deductions for instance, to boost middle class participation.
Apart from health care, the middle class do also have a concern about taxation. The recently delivered Budget proposes increasing the width of marginal tax bands in salaries tax to alleviate the burden of 1.3 million taxpayers. This definitely is a policy beneficial to the middle class and well worth our support. Meanwhile, the Budget announces the formation of a tax policy unit for reviewing the taxation issue on all fronts. I hope that the relevant study can also look into the tax burden of the middle class and proposes a long-term solution to relief their economic pressure.
President, the global economy is highly volatile. While it is calm on the surface, major problems are embedded in the economies of the United States, Europe, the Mainland and Hong Kong, and we see no rosy prospect. If a financial crisis erupts again, I hope the Government can give some thoughts to the plight of the middle class and provide them with relief measures, along with those for grass-roots citizens.
I so submit.