MR CHAN KIN-POR (in Cantonese): Thank you, Deputy President. The middle class has always been the one being neglected in society. As Hong Kong has been pursuing a low tax policy, the Government’s welfare benefits are mainly expended on addressing the needs of the grass roots, and the Government has been doing a fairly great job on this. The middle class understands that Hong Kong’s tax rates are much lower than those of welfare states such as Europe and the United States. In the past, the middle class was pleased to pay less tax and did not mind having fewer benefits. However, things have changed with time. In the wake of factors such as high property prices in recent years, uncertain economic prospects, inflated commodity prices and population ageing, the cost of living and pressure of the middle class have been increasing. As such, the voices of discontent of the middle class have been increasing too. The society also recognizes the need to show more concerns for the plight of the middle class. I would like to thank Ir LEE Chun-keung for proposing today’s motion so that the Legislative Council can discuss the issue in depth.
Although Hong Kong has implemented a low tax policy, the middle class is indeed the one who pays the largest amount of tax in terms of tax to income ratio whether compared with the affluent class or the grass roots. Moreover, the middle class only enjoys very few welfare benefits when compared with the grass roots, which is why there is a saying that the middle class “pays large amounts of tax but enjoys few welfare benefits”, and it is also the reason for the discontent of the middle class. I agree that we should pay more attention to the needs and aspirations of the middle class. In fact, the Government has devoted a lot of efforts in recent years, such as proposing to increase child allowance, and providing the Newborn Baby Bonus, salaries tax rebates, and consumption vouchers, etc., which also benefit the middle class. However, if the welfare policy is to be expanded so that the middle class can receive more comprehensive welfare support, it will be necessary to increase taxes substantially, and it is inevitable that we will have to follow the example of Europe and the United States, with the biggest sufferer ultimately being the middle class.
For this reason, many years ago, I already advocated to unlock the social value of insurance, and make use of insurance to help the middle class by encouraging them to take out insurance with appropriate incentives provided by the Government, so that they can prepare well for their healthcare and retirement needs and do not have to rely on the Government’s welfare in the future. This is the best solution to cope with population ageing. Subsequently, the Government introduced a measure known in the community as the “Three Treasures of Tax Deduction”, which turned out to be very popular among the middle class. The “Three Treasures of Tax Deduction” refer to the Voluntary Health Insurance Scheme (“VHIS”), deferred annuity premiums and Mandatory Provident Fund (“MPF”) voluntary contributions. VHIS was launched in 2019 and members of the public are entitled to tax deduction of $8,000. The popularity of the measure is evidenced by the fact that more than 1.1 million insurance policies were issued as of 2022.
As for the deferred annuity scheme, the number of policies under the scheme exceeded 220 000 by 2022, with the annual premium per policy averaging at $72,000. However, the tax deduction of $60,000 per capita per year under the scheme is divided up by both the deferred annuity premiums and MPF voluntary contributions, making the amount of deduction obviously insufficient. Therefore, the insurance industry suggests separating the two schemes so that each of them can enjoy a tax deduction of $60,000. At the same time, it is suggested that members of the public should be allowed to claim the same amount of tax deduction for deferred annuities for their non-working spouses, so that couples can enjoy the same level of retirement protection. As a matter of fact, the tax deduction schemes can encourage the middle class to prepare ahead for healthcare and retirement. In the long run, it can reduce the Government’s public expenditure on the one hand, and provide tax relief to the middle class on the other, which is a good proposal that achieves multiple effects. I hope that the Government will continue to work towards this direction.
Deputy President, although we need to provide the middle class with more services and preferential policies, it is equally important that Hong Kong needs to provide the middle class with a better environment for development and more opportunities for upward mobility. The middle class aspires to self-sufficiency, and it has always been their preferred option to strive diligently for higher and better income and improved living conditions rather than relying on welfare benefits. Nowadays, their discontent is largely due to living pressure, the perplexity of the economic environment, and the lack of reasonable rewards for their diligent efforts. Therefore, I believe that the best way to help the middle class is to make Hong Kong’s economy bigger and stronger, so that the middle class can have more room for development and more opportunities for job promotions, so that the problems facing the middle class can be rooted out.
The Chief Executive made “headquarters economy” a key issue in the Policy Address of last year. I think the policy is not only effective in promoting economic development, but also a good approach in helping the middle class. “Headquarters economy” aims to leverage Hong Kong’s advantages to attract international and Mainland enterprises to set up regional headquarters or offices in Hong Kong, thereby creating a large number of quality jobs. Meanwhile, the business sector or professionals hope that there will be more business opportunities and the whole economic “pie” can grow bigger and bigger, so that the middle class can be provided with opportunities for development and upward mobility. Therefore, I hope that the Government will promote the development of “headquarters economy” expeditiously. It should also follow the example of Singapore in taking the initiative to attract enterprises and investments, and make every effort to attract enterprises to invest in Hong Kong.
Thank you, Deputy President.