MR CHAN KIN-POR (in Cantonese): President, in today’s motion, the Government is urged to optimize public finances and enhance the impetus for innovation in Hong Kong’s economy. It is true that Hong Kong’s economic competitiveness has lost dynamism long ago and in recent years it is even going backward with no advancement. If we do not wake up and regain the fighting spirit of Hong Kong people, the prospect of Hong Kong is indeed worrying.
Frankly speaking, Hong Kong is troubled by a number of problems. The recent competitiveness ranking of Hong Kong has dropped from first last year to third. On world university rankings, the University of Hong Kong has slid by eight positions to 43rd. Though these rankings are not bad, an in-depth examination of Hong Kong’s situation reveals that the city is losing its advantages. We really should not take this lightly. What I am most worried is that many people still do not believe that Hong Kong is now in crisis.
The difficulties faced by Hong Kong are too numerous to list. Examples include high property prices, high rentals, serious poverty problem, declining education quality, imbalanced economic structure, deteriorating business environment, and so on. These problems have been plaguing us for a long time and have directly or indirectly affected Hong Kong’s competitiveness. If we still blindly believe in the policy of positive non-intervention and take no remedial measures, Hong Kong will surely continue to degenerate. Moreover, our competitors have been glaring at us like a tiger. If we still do not wake up, we will sooner or later lose our position as an international financial centre. By then, Hong Kong’s economy can no longer support 7 million people.
Nevertheless, despite the various difficulties faced by us, Hong Kong still has its strength and advantages. As long as we are determined to optimize our existing advantages, we can still break away from the current predicament. One of our advantages is our sound public finances, with fiscal reserves as high as $700 billion. So I strongly agree with the proposal of optimizing public finances. In fact, with the support of sound public finances, we are already better off than many places suffering from financial hardship. We can make use of our huge wealth to overcome our social and economic problems.
Of course I am not encouraging an indiscriminate use of our wealth, but I also oppose handing out sweeteners casually. But we can overcome the present social hardship and enhance Hong Kong’s competiveness by optimizing public finances. This is in fact an investment in the future as our treasury will gain considerable returns. Hence when it is the appropriate time, we should boldly make use of money instead of being a scrooge. Fiscal reserves, no matter how big the amount is, will eventually be used up one day. But an investment in the future will generate continuous wealth.
On the other hand, I agree that it is necessary to consider the proposal of broadening the tax base. But, more important still, Hong Kong should first promote economic development. If more wealth is gained in society, the Government will get more tax revenue. In fact, if the economy can be effectively stimulated, it is worthwhile to implement measures such as tax reduction. In the past, I have repeatedly suggested to the Government to promote headquarters economy by attracting foreign-owned companies to set up their regional headquarters in Hong Kong, so as to provide impetus to our economy and create more jobs. But to promote headquarters economy, we have to provide tax concession to foreign-owned companies in the first place. It is a pity that the Government has never taken any action in this regard.
Of course, there is also opposition in the community to a tax reduction, for fear that this would only benefit business organizations. But as pointed out by some scholars, tax reduction will boost the economy and increase tax revenue instead. The abolition of estate duty is a good case in point. After the abolition, Hong Kong has gradually developed into an international asset management centre. The proposal is innovative. Similarly, a modest reduction of profits tax will definitely stimulate economic investment and enhance the competitiveness of Hong Kong, thereby increase tax revenue. I also support a modest concession of salaries tax to relieve the burden of Hong Kong people, especially the middle class, which in turn can stimulate consumer sentiment and boost the retail industry.
I understand that the proposal of tax reduction will certainly arouse controversy. Some may even think that the stability of tax revenue may be shaken. Therefore I suggest setting a trial period. For example, tax can be reduced for two years, followed by an assessment of its effectiveness. If positive feedback is received, tax reduction will continue; otherwise, it will be suspended. Such a flexible approach can probably set the opposing parties’ mind at ease. In fact, our competitor, Singapore, has adjusted its tax rates from time to time in the light of economic and international trading environment, so as to enhance competitiveness. I think these experiences will be valuable reference for us.
I so submit.