HK Government Admits Full Extent Of Property Slump Impact For The First Time

by Mary Swire, Tax-News.com, Hong Kong

27 September 2002

The Hong Kong government executed a surprising turnaround this week, admitting publicly for the first time that the territory's depressed property prices are boosting deflation, and in the process seriously damaging the economy.

The Hong Kong Standard reported that, speaking at the Forbes Global CEO Conference on Monday, SAR Chief Executive, Tung Chee-hwa announced that the ongoing fall in property prices is having 'a major deflationary impact on Hong Kong.' He continued: 'Deflation is doing huge damage to our economy. So we really need to put a stop to it.'

Previously, the SAR's authorities have chosen to blame deflation in the jurisdiction on many other factors, including Hong Kong's proximity to the Chinese mainland, globalisation, and economic restructuring activity, rather than looking at property values as a possible cause.

Part of the reason that the decline of the property sector has impacted so hard on Hong Kong's economy is because of the structure of the jurisdiction's tax system, which is primarily reliant on income and property taxes.

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