Political situation
Written by: Lin Jian
2021-02-15 07:00
Last update date: 2021-02-15 07:00
Financial Secretary Chen Maobo will release a new budget next Wednesday (February 24).
At present, the public’s attention to the budget mainly revolves around two aspects: Will the government take more measures to "distribute sugar" under the weak economy and poor people’s livelihood, or even distribute money to all people for two consecutive years?
After the government's fiscal reserves fall to 800 billion yuan, is it necessary to review the room for tax increases, stabilize government revenue, and solve the long-standing narrow tax base?
The budget is the convergence of the government's public finances and economic policies for one year, but readers who are "clear about" will know that the decision of the treasurer at critical moments has always been political factors, that is, the attitude of major parties and the general public.
Behind the distribution of money and the reform of the tax system, after all, there are more political issues than public finances.
In particular, tax reforms have been discussed in Hong Kong for more than two decades, and none of them has succeeded in bringing about structural reforms, because the talk of tax increases will inevitably touch the interests of certain people.
Cai Ziqiang, a senior lecturer in the Department of Politics and Administration at CUHK, said that in the current political environment, even if there are no more democrats in the parliament, the government should be able to govern administration much easier. At this time, you may not be willing to support the government in making unpopular decisions on people's livelihood issues, otherwise you may be "burial" at any time.
▼List of proposals from major parties in the 2021 Budget▼
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Liang Jinsong is the only one who dares to increase taxes substantially but indirectly pulls himself down
Hong Kong’s tax base has been narrow for a long time. Article 108 of the Basic Law states that “the Hong Kong Special Administrative Region shall refer to the low tax policy originally implemented in Hong Kong”, while Article 109 requires the SAR government to “provide an appropriate economic and legal environment to maintain Hong Kong. Status as an international financial center."
As a result, low tax rates and simple taxation have become important indicators for Hong Kong's taxation.
However, under this tax system, many important government revenues are easily affected by external factors and economic cycles, such as land sales proceeds, stamp duty, and investment returns of the Exchange Fund.
Unstable government revenue has often become a reason for some people to "explain" it is difficult to increase recurrent expenditure.
In the early days of the reunification, the government established the "Consultative Committee on New Tax Matters with a Broad Tax Base" in 2000 and consulted the public in 2001.
In 2002, the then Financial Secretary Leung Kam-sung proposed to reduce the tax allowances for tobacco and alcohol; the following year, he proposed to increase profits tax, salaries tax, automobile first registration tax, departure tax, and gaming tax.
However, Liang Jinsong himself was accused of "buying a car stealthily" before announcing the increase in the first registration tax for cars without reporting. The scandal eventually led to his stepping down. This is something later.
Liang Jinsong is the only rich man who has dared to propose a large-scale tax increase since the reunification, but his fate was dismal.
(Information Services Department/Information Picture)
Tang Yingnian raises taxes again
When Tang Yingnian took over as the Financial Secretary, the government successively reduced the marginal tax rate of salaries tax and exempted inheritance tax and wine tax.
The government put forward the "Public Consultation on Tax Reform" in July 2006. The biggest controversy was the proposal to introduce a goods and services tax. The goal is to increase the revenue of the warehouse by about 30 billion Hong Kong dollars each year.
The proposal is strongly opposed by the society, especially the goods and services tax is regressive. Low-income people buy most of the daily necessities, but high-income people can reduce unnecessary consumption, causing the new tax to increase the burden of low-income people. , Was questioned aggravating the disparity between the rich and the poor.
In the end, the government announced in December of the same year that it would no longer promote goods and services tax.
At that time, there were rumours in the political circles that the then Chief Executive Tsang Yin-quan, who was still in a high position of popular popularity, wanted to create a "good momentum" for re-election, and did not want to introduce a policy of "pouring rice" at a critical time.
In the end, the government issued the final report of the public consultation on tax reform in June 2007, stating that the public failed to accept the government's levy of goods and services tax at this stage, but believed that the consultation had deepened the public’s understanding of Hong Kong’s narrow tax base. Three principles are proposed for future tax reforms: 1. It can effectively broaden the tax base and provide the government with stable and substantial income to meet future needs; 2. It is fair and can meet the principle of paying more for those who can and will not widen the rich and the poor. Gap; 3. To maintain Hong Kong’s simple and low-tax tax system to attract investment and talents and maintain our competitiveness.
Financial Secretary Chen Maobo.
(Profile picture)
Unconditional tax increases on surplus over the years
Since then, tax reform has not entered the scope of the government’s agenda. Especially since Tseng Junhua became the treasurer, the government has recorded surpluses for years, and there is no condition to propose tax reforms. Instead, the public is more focused on "treasury flooding". How does the government share the results with the public .
The tax proposed by the government in the past decade or so is not for increasing taxation, but for other policy purposes. For example, the additional stamp duty is mainly to reduce speculation in buildings.
As of last year’s budget, Chen Maobo stated that there will be a deficit of about 37.8 billion yuan in the 2019/20 fiscal year, and is expected to have deficits in the next few years. In addition, under the new crown epidemic, the government will spend 300 billion yuan to save the economy and tax reforms. The suggestion was raised again.
However, when Chen Maobo proposed to the media about "tax increase" several times since last year, he has always aroused strong public opinion, which shows the sensitivity of the issue.
Cai Ziqiang believes that from a political perspective, it is difficult to predict any breakthrough policies in this year's Budget.
(Profile picture)
Cai Ziqiang: The political difficulty of tax increase is extremely difficult.
Cai Ziqiang said that if analyzed from a political point of view, the fiscal deficit this year reached 300 billion. If you ignore the financial needs and spend a lot of money, it will not be good for the treasurer's political performance. It is estimated that it will be difficult for the whole people to distribute money again.
He recalled that in the previous years of Donald Tsang, Donald Tsang generally gave the political stage to Tsang Junhua to "perform" on his own, and anyone with a discerning eye could see that one of the goals was to "cultivate" the latter's political energy and pave the way for his future election as chief executive.
However, in recent years, the Chief Executive has tended to "take back" some popular policies. Leung Chun-ying obviously sees Tseng Junhua as a potential competitor. With the intention of fighting for re-election, Chen Maobo is regarded as one of the "dark horses" of the next chief executive. Whether Lam Cheng will allow the Financial Secretary to "success" first is questionable.
When it comes to tax increases, Cai Ziqiang believes that in this economic environment, no matter which group the tax increase is targeted at, the political risk is higher than before. "The majority of the establishment are not welcome."
He specifically mentioned that the establishment in the coming year will have more political "hard tasks" to be dealt with, such as amending public officials' oaths, and changing the electoral system rumored to be outside.
Under such circumstances, they may not be willing to "burial" people from different sectors with the government in terms of people's livelihood and economics, and consume political energy.
Therefore, the treasurer will at most propose to "study" how to improve the tax system, and there will be a "three-point rush", but it is a fantasy to make drastic reforms.
Therefore, Cai Ziqiang predicts that since it is difficult to send money and tax reform is easy to offend others, it is estimated that this budget may not have any breakthrough ideas. At most, I will respond individually to the policy propositions of the major political parties.
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