Hong Kong Government Faces Resistance Over Broadening Tax Base

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

14 August 2001

It was announced recently that the Hong Kong government is facing widespread opposition in its quest to broaden the territory's tax base. Among the proposed new taxes suggested by a government appointed panel last week was a 3% sales tax to which retailers reacted angrily, saying that a consumption tax would depress their businesses further in the current sluggish business climate.

Although Hong Kong Financial Minister, Antony Leung Kam-chung attempted to allay public fears last week, saying that there would be no new taxes introduced in the short term, he did leave the door open for a broad based tax 'when the right time comes', and it is this announcement that has sparked the recent flurry of excitement among Hong Kong residents.

It has been estimated that under the territorial taxation regime in operation in the SAR, only one in six of the 6.9 million Hong Kong residents actually pays income tax there, and as a result, the threat of introduction of new taxes or expansion of existing ones has not gone down well. The Liberal party has said that the government should concentrate on cutting expenditure before raising or introducing new taxes, heaping more criticism on the already beleaguered body, which has recently come under fire for its spending on the civil service.

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