MR CHAN KIN-POR (in Cantonese): President, I thank Mr Andrew LEUNG very much for moving this motion. Once again, it demonstrates that Members of functional constituencies really do bear in mind the interest of Hong Kong. They are far better than those Members who claim that they can represent the public but actually are just marginally elected in a direct election. They keep smearing Members of functional constituencies once they have entered the legislature. Moreover, they keep doing things to hurt the public. They make all those who have elected or voted for them feel a great pity. I have all along been agreeing with the fact that society should provide more opportunities for upward social mobility. Members in this legislature should endeavour to give young people better chances to join the middle class and have a better way out. This is the goal we should endeavour to achieve.
It is unfortunate that since the economy of Hong Kong has reached its maturity, it is very unlikely for the scale of our economy to enjoy persistent expansion which we have seen in the years before the 1990s. Furthermore, the emigration tide in those years left a large number of vacancies at the middle to high ranks for young people to choose. As long as one was willing to work hard, one could successfully ascend to the middle class in those years. Nevertheless, as the economy has reached its maturity these days, it is very difficult to expand the scale. There are not many new posts of good quality. The current wastage rate of employees is rather low. As a result, even if young people who have just graduated from university are willing to work hard, they may not be able to find a job which can facilitate their upward social mobility. It is even harder for the average young people to find a job.
This is not unique to Hong Kong. In various European countries, young people not only lack the opportunity of upward social mobility but also have difficulty in securing a stable job. Their situations are worse than that of Hong Kong. Other mature economic entities in Asia are facing similar situations. Such countries include Taiwan, Japan, and even South Korea. Young people in these countries lack the opportunities for upward social mobility. Their competition in the workplace is rather fierce, and the extent is even worse when compared with their counterparts in Hong Kong.
The most direct way to help young people achieve upward social mobility is to create more jobs of good quality and to help them start their own businesses.
The development of traditional industries in Hong Kong has reached its maturity. If we fail to inject new driving forces, it is impossible for us to achieve further expansion. For that reason, I advocated a few years ago the introduction of headquarters economy, which means that the Government would provide tax concession and policy support to attract sizable multinational corporations to come and set up regional headquarters or regional offices in Hong Kong. This would not only enhance Hong Kong’s scale of economy and strengthen the competitive edge of Hong Kong directly, but also supply immediately a large quantity of jobs of good quality and jobs with global perspective. Actually the stone will kill many birds. Among Asian countries, Singapore’s economic development has reached its maturity but its economic development is still booming. One of the positive factors is that it has successfully attracted a large number of well-known multinational corporations to make investment in Singapore. This is worth our learning.
At present, the Government seems to be heading towards the right direction. The Financial Secretary pointed out in the newly announced Budget that in order to attract multinational and Mainland enterprises to establish corporate treasury centres (CTCs) in Hong Kong, the Government would amend the Inland Revenue Ordinance to allow interest deductions under the profits tax for CTCs and reducing profits tax for specified treasury activities by 50%. Later, a spokesperson of the Hong Kong Monetary Authority added that as a lot of multinational enterprises would establish regional headquarters and CTCs in the same place, it was hoped that the new initiative would encourage multinational enterprises to establish CTCs in the city, thereby boosting the direct capital inflow into Hong Kong.
The proposal will help enterprises choose Hong Kong as the site for the establishment of their CTCs. It will also help enterprises to set up regional headquarters in Hong Kong. At present, I do not know how attractive the scheme really is. However, I am sure that it is a good start for headquarters economy.
As to the promotion of headquarters economy, Hong Kong actually has a lot of new opportunities. It is reported that a number of technology companies in the Mainland are going to set up international research bases in Hong Kong. For instance, TCL has moved in the Science Park. Xiaomi is considering setting up its headquarters in Hong Kong. These companies are having their eyes on Hong Kong’s international network as Hong Kong can attract international talents to come and may facilitate their globalization plan. If Hong Kong can introduce timely policies and tax concessions, I believe we can attract more corporations to come to Hong Kong. The long lasting economic growth of America is driven by its high technology industries. Much to our regret, due to political reasons, we are unable to establish the proposed Innovation and Technology Bureau. I hope the development of Hong Kong will not be seriously hampered because of this.
Moreover, I think if we are to expand the ratio of the middle class among the population, besides providing upward social mobility for young people, we need to provide more assistance to members of the middle class. Otherwise, in view of the huge economic pressure faced by the middle class, we cannot rule out the possibility of the downward mobility for the middle class. I have suggested that instead of making tax refund to all taxpayers, we should concentrate the firepower on waiving all the tax payable by people with a monthly salary of $60,000 or below. To middle-class taxpayers, this suggestion will benefit them most.
The recently announced Budget proposes a reduction of salaries tax and tax under personal assessment for the 2014-2015 year of assessment by 75%, subject to a ceiling of $20,000. The proposal will reduce government revenue by $15.8 billion. In fact, the concession seems to be fair on the surface, but it does no good to anyone at all. Due to the constraint of the 75% reduction and a ceiling of $20,000, it is meaningless to grass-roots taxpayers as they pay less tax. Meanwhile, under the constraint of a ceiling of $20,000, members of the middle class still have to pay a hefty sum of tax. Nevertheless, to people who earn an annual income above $1 million, a reduction of $20,000 is basically something trivial.
As a matter of fact, according to the information of the year 2012-2013 at hand, the tax paid by taxpayers with an annual income below $700,000 (that is, a monthly salary below $60,000 or a little bit more) only accounts for less than 20% of the total salaries tax, at $9.6 billion. In other words, if the tax of taxpayers who earn an annual income under $700,000 is waived completely, it is not necessary for the Government to use up all the estimated $15.8 billion. The remainder will be adequate to provide partial tax concession to people who are earning an annual income over $700,000.
Under the tax concession scheme proposed by me, about 85% taxpayers are not required to pay a single dime for tax. Yet it will not cost any extra expenditure in the estimates. The middle class will be the most benefited group. I believe the majority of the population will be genuinely benefited. Of course, we should state it clearly to the public that the concession is a temporary measure only. It will depend on the actual circumstances of each year. When financial need arises, the public should observe the taxation system and pay their taxes.
I so submit.