Hong Kong Advisory Committee Proposes Broad-Based Taxes, Calls For Public Consultation

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

07 August 2001

The Advisory Committee on New Broad-based Taxes yesterday (Monday) unveiled plans for new broad-based taxes in a bid to raise more revenue for Hong Kong and has issued a consultation document to seek the public's views on what types of taxes may be suitable for Hong Kong.

Entitled 'A Broader-Based Tax System for Hong Kong?', the consultation document details 13 options with which the tax base can be broadened. The options fall into two groups - those that would increase the revenue productivity of existing taxes and those relating to the introduction of new taxes.

The former involves raising the rates of salaries tax, profits tax and stamp duty on property as well as reducing allowances and deductions under salaries tax. Possible new taxes include capital gains tax, tax on interest, on dividends and worldwide income, a land and sea departures tax, payroll and social security taxes, poll tax, a general consumption tax and tax on mobile telephones and signboards.

Speaking at a press conference to launch the two-month public consultation exercise, the Chairman of the Advisory Committee, Mr Moses Cheng, stressed that the Advisory Committee had not taken a position on any of the options studied. 'We would like to hear the views of the public before submitting our report to the Financial Secretary by the end of this year. Tax is never a popular subject, but we sincerely invite the public to address the issues in an open-minded manner,' he said.

Mr Cheng added: 'Eventual implementation of any tax proposals will be the prerogative of Government. I have no doubt that the Government will take into account all important considerations before making a final decision on issues such as detailed design and timing of implementation.'

One of the most controversial taxes proposed is the sales tax which, if levied at 3 per cent, says the Committee, could bring in an extra $180 billion to the government's coffers alone. Mr Cheng explained: 'The purpose of introducing sales tax is not to increase taxes but to broaden the tax base and this makes the tax system stronger. Tax evasion can be prevented if new taxes are levied at the retail level.' He pledged that measures would be implemented to protect those on low incomes or social benefits.

'The new sales tax would not have an adverse effect on Hong Kong's tourism. Tax rebates would be made available to tourists,' continued Mr Cheng.

The establishment of the Advisory Committee was announced by the Financial Secretary in the 2000-01 Budget in the light of projected operating deficits for some years to come. Established in June 2000, the Advisory Committee has surveyed the practices in other developed jurisdictions, and considered the relevant benchmarks for good tax systems against which it evaluated the system in Hong Kong.

The Committee's consultation document can be downloaded from the government's website at: http://www.info.gov.hk/fb/ac/index.htm

Recommended