Roaming free?
The long way round

What was the question again?

The SCMP seem to have wasted some money on a survey about what 'opinion leaders' think about tax reform. And the answer is, er, well, actually they aren't quite sure.  However, having paid for the survey, the SCMP were determined to publish it (though maybe it wasn't wise to make the actual Powerpoint presentation available for download, which is what they did on Monday, and it's now been replaced with a Powerpoint Slide Show).

Six out of the 700-odd respondents apparently felt that the tax base was too wide, which is an interesting point of view. However, when asked to explain themselves, four of them argued that high land prices equate to a form of indirect taxation. Which is true - up to a point, but the people who are most affected are the middle-classes who already pay salaries tax. I have seen it argued that everyone pays this indirect tax through higher prices in shops, but that's quite a stretch, and certainly not relevant to this argument (after all. you could argue that almost any tax paid by companies is passed on to consumers).

More puzzling are the 26% of respondents who seem to believe that the low rate of profits tax is one reason why the tax base is too narrow. I hope they don't really think that, because low tax rates reduce the revenue but they don't make the tax base narrow.  OK, yes, it's easy to get confused on this, because what the government is really concerned about is tax revenues, and the narrow tax base is seen as a primary cause of this, but they are two separate issues. 

Fortunately they did talk to some people who at least understood the questions they were being asked:

79% of respondents identified that the fact that only 35 per cent of the working population pay salaries tax as a problem.

Correct answer, but hardly a startling insight.  However, I'm not so sure about this one:

65% said that one cause of the narrow tax base is that only 1.2 per cent of Hong Kong's 63,000+ corporations pay 64 per cent of profits tax.

Is that really a cause for concern?  There's a similar phenomenon with salaries tax, because Hong Kong has a small number of very rich people and very profitable companies, but it's nothing to do with the tax system.  If the government can find a way of widening the tax base, it would probably reduce the percentage of tax revenue from the very rich, but only marginally, and that's not really the point.      

The solutions offered by these 'opinion leaders' include a luxury goods tax, green taxes, and a land and sea departure tax (I thought they were going to introduce once of those?), none of which are likely to raise enough to make a different (and isn't a luxury goods tax just a variant on GST?).  There was also support for raising the rate of profits tax, even though that's not going to widen the tax base.  More logically, there was support for capital gains taxes, tax on worldwide income, and tax on dividends, none of which seem likely to find favour with the government. 

So nothing much useful there, then.


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I am surprised and impressed that you have not used the word 'surprise' and its derivatives on your blog this year.

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