Motion on “Review Complementary Measures Relating to Population Policy & Tax Concessions”(2011.01.19)

Hon KP Chan on Motion on Reviewing Public Finances Policies

•    In the past decade, the economy has been growing continuously but the poverty situation in Hong Kong has been deteriorating. The income of many members of the public is lagging behind economic growth and the fruits of economic success cannot trickle down to the general masses. What the public wishes to see is a combination of social and financial strategies that can solve various deep-rooted problems.

•    Take the poverty problem as an example, apart from economic restructuring and the imbalance in the development of industries, the lack of well-conceived complementary measures relating to employment in the population policy of Hong Kong is also one of the causes. As a result, low-skilled people with limited knowledge keep showing up in droves in the working population, with a lot of job seekers competing for a limited number of elementary jobs. When the Government provides support to the public through fiscal policies, it should also implement complementary social policies to solve problems more holistically.

•    I support the proposal to review Hong Kong’s policies and measures on social welfare and public finances, including the establishment of a universal retirement protection system to lessen the drastic increases in the Government’s welfare expenditure caused by the ageing population in the future. I also agree with reviewing the relationship between the present tax regime and the various contributory schemes, including the Mandatory Provident Fund schemes and the health insurance schemes currently under consultation, and consideration should be given to counting the contributions concerned as tax already paid.

•    A simple tax regime with low tax rates has all along been one of the cornerstones of Hong Kong’s success, but the tax regime should also keep abreast of the times, and be flexible enough to dovetail with various policies. With the complete opening up of the Mainland to the outside world, globalization of world economy and the sustained reforms of the tax regimes in neighbouring regions, the taxation policy of Hong Kong has been unable to keep up with changes in the international environment.

•    Many countries and cities striving to develop a “headquarters economy,” such as Beijing, Shanghai, and Singapore, are very aggressive in their approach to attracting foreign capital to establish regional headquarters with attractive terms. Subsidies are given by the Shanghai Municipal Government to companies which have established their regional headquarters for opening offices, as well as rewards proportional to turnovers. Similar measures have also been put in place in Beijing, and Singapore is enhancing competitiveness through tax concessions. The business and accountancy sector have indicated support for the introduction of more tax concessions by the Government to encourage more multinational corporations to establish regional headquarters here, so as to create more employment opportunities.

•    Some views hold that if the Government reduces taxes, it will receive less tax revenue and the business sector will be favoured. However, many figures tell us that there can be positive interaction between the economy and tax revenues. Reducing the tax rates to an appropriate level can even make the economy grow continuously, thus increasing the revenues for the coffers.

•    A headquarters economy has gradually become a point of tax revenue growth for Shenzhen. In 2010, the Shenzhen Special Economic Zone received $28.7 billion in tax revenue from areas with company headquarters, an increase as high as 31%. The same applies to Futian District. In 2010, 56 enterprises with headquarters under the control and management of the authorities paid a total of $5.6 billion in taxes, an increase of 58%.

•    I hope the Government can show greater flexibility and boldness in reviewing the fiscal policies of Hong Kong, so that the tax regime and other fiscal policies of Hong Kong can keep abreast of the times and meet the genuine needs of the public.

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