[Budget] Sales tax is coming again? There was another reason for Tang Tang's sudden car fear of accidents

Politics

Written by: Zheng Baosheng

2020-03-04 07:00

The Financial Secretary, Chen Maobo, announced the Budget last week, mentioning the need to consider exploring new sources of income or adjusting tax rates. The increase in taxes is inherently sensitive. In an earlier interview with Bloomberg, Chen Maobo also pointed out that it does not rule out that Hong Kong will levy a sales tax, which is another big bomb at any time.

The bomb story is not groundless. Tang Yingnian, then the Financial Secretary in 2006, also studied the levy of a sales tax, but was strongly opposed by the community. What pressure did Tang Yingnian face then? Why did Chen Maobo favor Hushan?

Reduced labor force, increase in elderly income, decline in expenditure but increase in expenditure

The new "Budget" shows that from 2021 to 2022 until 2024 to 2025, the annual deficit is expected to range from 7.4 billion to 17 billion yuan. Although the government's fiscal reserves are large, "a few are afraid of long-term planning", the future labor population will decrease, and the elderly and social welfare expenditure will inevitably increase with the aging of the population. In addition, short-term epidemics and the post-epidemic economy will use funds to "buy valleys" How to open source has become a government priority.

The Budget states that government revenues have failed to keep pace with expenditures and may need to consider exploring new sources of income or adjusting tax rates. (Profile picture)

In an interview with Bloomberg, Chen Maobo mentioned that the levy of sales tax is not ruled out, and he understands that the levy of taxes is controversial, and he believes that discussion with society will be very important.

Chen Maobo developed a sales tax, which can be described as "knowing that there are tigers in the mountains, and he prefers to travel to Hushan." In 2006, the Hong Kong government also discussed the introduction of a sales tax, which eventually triggered a huge rebound in public opinion.

Tang Yingnian levied sales tax in 2006 to broaden tax base

Hong Kong has always implemented a simple low-tax system. In fact, before 1997, the Government had repeatedly studied the implementation of sales tax, but it was not implemented in the end. Until July 2006, Tang Yingnian, then the Financial Secretary, announced that he would study the introduction of a sales tax to broaden the tax base.

The consultation document at the time stated that the government intended to levy a 5% goods and services tax, which was expected to add 30 billion yuan in revenue to the warehouse. Part of the tax will be used to help low-income people, and part will be used to subsidize water fees and rates. At the same time, the government promises that the first five years of net income will be returned to the public in various ways.

Grass-roots, business, and inter-party opposition stopped short of consultation

However, when Tang Yingnian's research on sales tax met the "three big mountains", not only the grassroots strongly opposed it, but the business and the Liberal Party representing the business objected, and even the democratic and constitutional inter-party parties expressed opposition. It ended abruptly on December 5th in the middle of the consultation period.

At that time, there were reports that the sudden stop a few days before the election committee election was because then Chief Executive Tsang Yam-kuen wanted to re-election. "Cheng Bao" quoted Cai Ziqiang's analysis that the government of Zeng Yinquan would "demolition" before the election of elected members. In any case, the media representing the left, middle, right, and business circles at that time all agreed that the cessation of sales tax was a response to public opinion. In other words, in the Tang and Tang dynasties when the sales tax was suddenly braked, in addition to being afraid of a rebound in public opinion, there was also a political reason to avoid "bombing" Tsang's re-election project. As to whether Zeng Yinquan ordered him to "collect", it is unknown.

I have to mention that in July 2006, the government formally proposed to introduce a sales tax, which was a major blow to Tang Yingnian's career as an official. According to data from the University of Hong Kong's public opinion research plan, Tang Yingnian's score dropped from 7.4 points to 56.5 points from 63.9 points before the announcement, and remained at a low level below 60 points at the beginning of 2007, all the way to the February 28, 2007 "Budget" Only rose to 64.1 points. It can be seen that even Tang Yingnian, who was at the prestige level at that time, was also severely hit. For the current low prestige SAR government, there are many obstacles to the implementation of the sales tax, and Chen Maobo must step by step.

Chen Maobo said in an interview that sales tax is not ruled out. (Profile picture)

Many passive incomes are not reliable

The lessons can be learned. Why did Chen Maobo say that he should consider sales tax when the current government's popularity is low? The reason is that it is not possible to increase other taxes on a large scale and cannot increase revenues to "fill in".

Looking at the fiscal budget from 2020 to 2021, the government has slowed down a number of major incomes. Investment income is "looking at the sky", and because of the possibility of large fluctuations, it cannot be used as the main source of income. For example, stamp duty from property and securities transactions depends on the market transaction volume. Although the income is not low, the contraction rate can be large under the quiet market conditions. The same is true for land price income. If the upward trend in the property market reverses, land sales income may be sharply inserted and fluctuate greatly, and relying on land sales income will eventually lead to high land prices and high property prices, which is definitely not a long-term strategy.

Salaries tax can't increase tax sharply

Salaries tax, another major financial source of the Hong Kong Government, involves grassroots and middle-class citizens. In the current political climate, it can only increase the tax bands above the existing class and tax higher income earners. Profits tax involves competitiveness issues with neighbouring regions. Hong Kong's simple low tax system can attract foreign companies to set up companies in Hong Kong. If the tax rate increases significantly, these companies may withdraw from Hong Kong and adversely affect the economy.

As for stamp duty, gambling tax, and tobacco tax, even if they increase, the amount is also limited, and it cannot be the main force to support income.

After several counts, the existing tax revenue either cannot be greatly increased or it cannot become the pillar of government revenue. Chen Maobo's idea of ​​sales tax seems to be "there is no choice".

Before deciding to impose a new tax, it is necessary to persuade the public to fight for sufficient public opinion

If Chen Maobo confirms the introduction of a sales tax, he must first convince the citizens why it must be levied. He can list the options, point out the pros and cons of each item in detail, and explain why it is necessary to levy a new tax that reaches all strata.

When it comes to sales tax, Hong Kong people are most familiar with Japan's increase in consumption tax to 10% in October last year, but it seems that it does not harm the desire of Hong Kong and the world to travel to Japan. In fact, Japan ’s Prime Minister Shinzo Abe has faced strong opposition from the business sector in the way of levying consumption taxes. However, due to his efforts in sales promotion and effective interpretation, he was supported by other classes. The Liberal Democratic Party to which it belongs has won two general elections, and the public opinion base is solid. If Chen Maobo wants to levy a sales tax, he must also win public opinion before he can move forward.

Japanese Prime Minister Shinzo Abe raised the consumption tax from 5% to 8% in 2014, and his LDP has won two general elections since. (Reuters)

Only some projects in Japan are raised to 10% to avoid serious impact on people's livelihood

If Hong Kong levies a sales tax, it can also refer to Japan's approach. Japan raised the consumption tax to 10% last year. In fact, it only raised the alcohol, electronics, cosmetics, books, and service charges. For example, the tax on meals in restaurants, and food and newspapers related to people's livelihoods were maintained at 8% to reduce People's burden. When Chen Maobo introduced the sales tax, he could also levy taxes on only certain items, such as high-end consumer goods, so as not to seriously affect the lives of grassroots citizens.

Specify the purpose of tax collection to the public as worthy of levy

Consumption tax revenue in Japan is used in several ways, in addition to coping with financial problems, also to implement free early childhood education and childcare services, and to reduce the financial burden of higher education. One of the purposes is to promote a substantial increase in childcare services and release married women. Labor to ease labor shortages in the job market.

In fact, the Japanese government receives a consumption tax to increase overall income, and then allocates a portion of the overall income to promote free early childhood education and childcare services, all of which are "one number". Shinzo Abe emphasized that part of the consumption tax is used for the above-mentioned projects, which can be said to be a "lobbying skill", so that people can understand the purpose of taxation at a glance, create an image of "take from the people, use it from the people", and reduce the general public Dissatisfaction, this is perhaps the most practical textbook for Chen Maobo to research the sales tax.

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