Still on the subject of expat pay, Simon points out that David Webb has a letter on this subject in today's SCMP.  He points out is that although it is widely-believed that Hong Kong has a simple flat-tax system there are actually plenty of ways to pay less tax, one of which is to provide a housing allowance, a common component of expat packages. He also thinks he has spotted some hypocrisy in this proposal:

If Deputy Secretary for Home Affairs Stephen Fisher is serious about denying permanent residency to anyone getting what he calls "expat packages" or "overseas terms", then would he please tell us how many civil servants of his grade or above receive housing, rental allowances, overseas education for their children, air-conditioning allowances and other perks from their employer?

What utter hypocrisy.

The form of remuneration should have no bearing on a person's eligibility for permanent residency. Employers should be allowed to remunerate employees in whatever form they choose to recruit and retain talent, whether from Hong Kong or overseas, permanent resident or not. The total cost of compensation reflects the free-market value of an employee to an employer. How it is structured, in cash or benefits, is usually driven by other considerations.

The government should instead remove its fiscal incentive to structure packages. Employees should be taxed on the full value of all benefits received, including housing. Currently, housing or rent is only deemed to be worth 10 per cent of the value of the other income from the employer

Although Mr Fisher did say that the government would prevent people on "overseas terms" becoming Permanent Residents, this does not apply retrospectively, and I imagine that 99% of the civil servants on those terms have already become Permanent Residents and that very few (if any) generous packages like that are still on offer. 

"Those already on expat packages can continue on the existing terms of employment provided they remain in the same group of companies," he said.  "But after the law is in place, anyone recruited on overseas terms must have expertise that is not readily available in Hong Kong and that person must not be a Hong Kong permanent resident. If that person wants to remain on the overseas terms, he or she cannot become a Hong Kong permanent resident."

Anyway, it's all nonsense if you ask me.  How do they define "overseas terms"?  As far as I know it is quite legal to offer local staff a housing allowance or any of the other benefits that expats may be given, so how can they tell who is on "overseas terms"?  Oh, by the fact that are foreigners, right?  No discrimination there, then.

Also, if this mythical expat wanted to become a Permanent Resident, all they need to do is re-negotiate their package, swapping some of the benefits for cash.  Pay a bit more tax and become a Permanent Resident.