Members present the president the honourable andrew wong wang-fat, O. B. E., J. P
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- MRS SELINA CHOW
- MR CHENG YIU-TONG
- MR RONALD ARCULLI
- MR CHAN WING-CHAN
MR CHIM PUI-CHUNG (in Cantonese): Mr President, I believe the Financial Secretary will be most interested in this motion debate that we are having today. It is because he is keen on hearing Members' views so that he will not have to consult Members on his next Budget. Mr President, as I said before, in any motion debate each Member will have the opportunity to express his or her views. We are free to comment on the views held by the Member who moves the original motion and by Members who move amendments to it. Members, particularly those with political party backgrounds, should not comment on the personal views held by other Members. It is because those other Members will not have the opportunity to respond. I hope my colleagues will bear this in mind when expressing their own views. First of all, I would like to respond to the amendment proposed by Dr the Honourable LAW Cheung-kwok. According to press reports, he is arguing for "returning wealth to the people" in the form of $5,000 per person. I feel that, as far as wage earners and others are concerned, $5,000 is not "wealth" at all but just a trifling benefit. Therefore, the word "wealth" in the catchcry of "returning wealth to the people" is very much open to question. I believe that the Government will not distribute $20 billion to 4 million people who are over the age of 18. However, I would suggest that Dr LAW first distribute his own wealth among his children to enable them to buy whatever they like. I wonder if Dr LAW would be willing to do so. Last time when the Honourable David CHU moved his first motion I labelled him "Chu with just one cannonball in his gun barrel". Even he himself knew that he would be "Chu with just one vote in his favour". Today let me label Dr LAW "Law with just four rallying to his call" (laughter). Maybe it would not turn out the way I predict. Secondly, with regard to the Honourable CHAN Kam-lam's proposed amendment, I believe the Financial Secretary will this year do it the way as urged by Mr CHAN. But to lay too much emphasis on this would not, I think, be worthwhile. It is because the difference would be no more than $1.5 billion to $1.6 billion, that is to say, after the tax allowance is raised, the Government would receive $1.5 billion to $1.6 billion less in revenue. I believe the Government is already planning for this in the upcoming Budget. However, in emphasizing and holding this out as a measure to benefit the Hong Kong economy, the proponents, according to my personal opinion, are seeking to ingratiate themselves with the public. It is uncertain if the Government will consider it. It is uncertain if the Government will agree to give up that much. Anyway, the Government would receive $1.6 billion less in revenue. Lastly, Mr President, let me comment on the original motion. Today I am surprised to find that Dr the Honourable HUANG Chen-ya has presented rather rational views on behalf of the Democratic Party ─something he never ever did during his past four-year tenure as a Member of this Council. This perhaps is in response to his party leader's remark that the Democratic Party wants to work in harmony with all sectors of society. I believe that the Democratic Party's support for the proposal to lower the tax rates is prompted by its desire to curry favour with the business sector and to profess itself the leading political party. What worries me is that between them the Democratic Party and the Liberal Party can command 29 votes in this Council. Of course, the Honourable LAU Chin-shek, whom I persuaded a moment ago to quit the party, may not toe the party line and there may be one vote fewer. Therefore, it may not be 29 votes that the two parties can jointly command in the future. Mr President, in terms of revenue from income tax, one percentage point represents about $3 billion, in other words, in the context of Hong Kong's overall tax revenue, profits tax accounts for about $300 billion. Therefore, 16.5% would translate into $49.5 billion. If we adopt the Honourable James TIEN's proposal , the Government would receive $4.5 billion less in revenue from profits tax. This, coupled with the salaries tax concessions, would mean a loss of $6 billion in revenue. Of course, this is not an absolute amount but only an approximate amount. I personally will oppose Mr James TIEN's motion. The grounds for my opposition are: Profits tax implies that there is profit derivable from income. If there is profit, how can we prove that the downward adjustment by one percentage point will really promote the local economy? I am personally worried that this provides yet again another opportunity for the Liberal Party and the Democratic Party to "join hands". As far as the overall economy is concerned, how can we come up with data which can prove that if the profits tax rate is adjusted downwards by one percentage point many people will be ready to invest? This situation is akin to the one in which the labour sector demands the scrapping of the labour importation scheme. In principle, I support the scrapping of the labour importation scheme. But there must be data to prove that after the scrapping of the labour importation scheme local workers will immediately have jobs to do. Therefore, for a similar reason, I oppose the original motion. Mr James TIEN must provide data in this regard. Mr President, we have to understand that Hong Kong's economy has experienced ups and downs. During the past 30 years, there have been six ups and downs. Of course, discussion of this figure can wait until the debate on the Honourable Allen LEE's motion on economic issues about to start in a moment. We have to understand that when the economy is performing well we have to grasp the opportunity; when the economy is not doing well, we cannot just eye the $100 billion-odd that the Government has in reserve. Basically, a government is like a company or a citizen ─ society is made up of families and then a government comes into existence. In terms of financial management philosophy, when an opportunity arises a government must build up its fiscal reserve. Fiscal reserve will help Hong Kong raise its international standing; fiscal reserve will help raise the social and economic standing of a company; and fiscal reserve will help ensure the well-being of a family. Members of this Council have expressed their fervent hope that the Government will mobilize its reserve and spend part of it. The Government will naturally be happy to listen and accept Members' views and to make arrangements for it. However, in my personal view, such specific money-spending proposal being put to the Government is inappropriate, particularly in the present circumstances. Therefore, we should make suggestions as to how the Government will promote Hong Kong's economy and how, on the taxation front, it will expand the tax base. But if we suggest that the Government use the fiscal reserve, I personally think it will do no good to the Government, to the business sector or to the labour sector. Too many suggestions that the Government use the fiscal reserve will not help promote the overall economy of our society. Mr President, today I will adopt the "three-opposition policy", that is to say, I will oppose the three motions. MRS SELINA CHOW (in Cantonese): Mr President, in order to attract investment and to stimulate the economy, the first step will be to create a propitions environment. The first and foremost thing to do is to enhance people's consumption power and their confidence in the territory's prospects. The Honourable Jame TIEN's proposal of reducing the salaries tax and corporate profits tax is to leave more money in people's pocket. The former Financial Secretary emphasized the concept of leaving money in people's pocket in his last two budget speeches. I believe the new Financial Secretary will not do the contrary and take money out of people's pocket. There are different ways of leaving or returning money to the people. Dr the Honourable LAW Cheung-kwok's proposal of distributing money is also one of the methods. But methods can be good or bad. Distributing money is a welfare concept. It is a welcome suggestion as everybody will get a share. However, it will indirectly encourage laziness because one will get one's share by merely holding out one's hand no matter whether one works or not. If it is a subject for academic study and discussion, it will be barely acceptable. But if it is put forward as a serious and solemn proposal for the public's consideration, it will really be an insult to the dignity of the industrious people of Hong Kong. The effect of tax reduction is just the opposite. It will encourage a capitalistic concept of more work more pay. The more one works, the more one earns and keeps in one's pocket. Dr LAW, however, thinks that this proposal will make the rich better-off. His argument is misleading because tax break will also benefit the poor. Those who are outside the tax net or those who are unemployed will be benefited as they will have more employment opportunities or better employment terms as the economy as a whole revives. At least, they need not be worried that their companies will wind up or do retrenchment. Profits tax cut is not only advantageous to the employers. It is also a positive encouraging signal to the investors. The Hong Kong Taxation Institute pointed out yesterday that cutting corporate profits tax to 15% will stimulate the economy and create more job opportunities. Another misleading argument against tax cut is that all those who are eligible to pay profits tax are rich people. This is a mistaken concept and cannot reflect the actual situation of most of the small business operators. Neither can it fully reflect their opinions. In regard to the salaries tax, we should not forget that now there are 1.5 million people subject to the salaries tax. 9% of these people pay the standard rate. To leave more money in the pocket of these 1.5 million people who are economically active will certainly enhance consumption power and confidence which will in turn revive the economy. In regard to raising the personal allowances in order to reduce some taxpayers' burden, it will only further narrow the tax base such that the tax net will be concentrated on a smaller number of people. This may not be favourable to the stability of government revenue. But, on the other hand, if the tax rate is reduced as suggested by the Liberal Party, the tax base will basically remain unchanged while people's tax burden can be alleviated. This will be a sound arrangement. Mr President, the Government, on the pretext of positive non-interventionism, said that there is little it can do. The Government's statement shows that it is shirking its responsibility and is incorrect. This may be a cue from the Financial Secretary that we should not "positively intervene" in the work of the Government. A small move on the part of the Government can in fact have a profound psychological effect. The Government should not look at figures on the book and ignore the psychological factor, the impact of which will be much greater. In 1993 when the Government scrapped the duty on cosmetics, all cosmetics trade associations promised to cut price by 10% to 12% in the following year. Eventually, in 1993, the total value of imports in 1993 was increased by 40% whereas the total value of imports in 1994 was increased by more than 30%. On the contrary, lawful sale of cigarettes in 1991 after the tobacco duty had been doubled dropped by 30% leading to a large amount of cigarettes being smuggled into Hong Kong. Revenue from tobacco duty in that year had only increased by 15% compared with the year before. In 1993, specific rate on tobacco was further increased by 9.5%. But the actual revenue was $0.6 billion less than expected. The revenue that the Government had lost went to the pocket of the illegal dealers. The Government's revenue has dropped on the one hand, yet not much actual effect was seen in terms of improvement of the people's health, which was put forth as a ground for raising tobacco duty. Today, tobacco dealers estimate that there are 30% of smokers who are still consuming cigarettes smuggled into Hong Kong. Did the Government calculate how much revenue from tobacco duty it had lost over the past few years? Similarly, ad valorem duty on alcohol was introduced in 1994. It was originally expected to fetch $1.3 billion in revenue. But this duty led to a drop in the sale of high-priced alcoholic beverage. The revenue from this kind of duty in a year was only $0.9 billion, almost 30% less than expected. A similar situation was observed in the motor car sector. Various kinds of duties, fines and big increase in tunnel tolls have all dampened people's desire to purchase cars. There was almost a 20% drop in the sale of cars from 1992 to 1994. The sale of private cars during the first nine months of this year has dropped by more than 30% compared with the same period last year. Can the Government be indifferent on seeing that these trades are suffering loss? Is the Government proud of seeing less revenue for the Treasury? Obviously, the Government's tax policy can influence the market development. The Government must seriously review whether these arrangements have any negative effect on the Hong Kong economy. If they do, the Government must have the courage to make changes. Tax cut gives us an instant impression that the Government will incur losses. But the above examples illustrate that tax increase will lead to reduction of revenue while tax cut will stimulate the economy and revenue will be increased. Why not take a measure that will give us two advantages? The tax issue I have just said illustrates that the Government can influence the market by different taxation policies. This depends on the Government's willingness to do it and how to go about it. Tax concession or the relaxation of unnecessary regulation will stimulate the economy and increase employment opportunities. In Singapore, for instance, a different kind of incentive is given to employers who have hired elderly workers so as to encourage them to employ more elderly workers. The Hong Kong Government can also attract factory operators to establish their factories in Hong Kong by offering tax concession so that more local workers can get jobs. It can also expand the concept of industrial estate so that not only large-scale industries can develop in the industrial estate. These are other suggestions that are worth considering. Mr President, with these remarks, I support the original motion. MR CHENG YIU-TONG (in Cantonese): Mr President, I am against the Honourable James TIEN's motion in relation to reduction of corporate profits tax. The reason is very simple. During economic recession, people in the business sector ask for reduction of corporate profits tax. But during economic growth, they never ask for increase of corporate profits tax. Last year, the Financial Secretary delivered the budget under the title of "Managing Prosperity". However, after a little more than a year, I think it will be more proper to retitle it "Mismanagement to the Retrogression of Prosperity". I have no intention to deny the contributions of the Government in its management of finances, nor dare I negate the economic achievement of Hong Kong. I only query whether the Government is "robbing the poor to subsidize the rich". During the last decade, the gap between the rich and the poor has been getting wider and wider. The Government only knows how to protect the interests of the business sector but neglects the interests of the lower strata of the community, not to say restoring wealth to the people. The entire taxation system is built on unjust social principles! At present, the corporate profits tax is paid according to a fixed rate irrespective of the amount of profits earned by the companies. As a result, even though the business sector is earning huge profits, it is unable to shoulder the responsibility of reasonably paying back to society. Besides, the taxation policy of the Hong Kong Government is obviously in favour of the business sector. The government income from corporate profits tax last year was 20% more than the previous year. But this year's income exceeds last year's by a drastically reduced margin of 3.6%. On the contrary, the income from salaries tax last year was only 4% more than the previous year. But this year's income exceeds last year's by a much wider margin of 11%. This demonstrates that the proportion of salaries tax as a component of the total income from direct taxation is getting larger, while the proportion of corporate profits tax is getting smaller. In fact when we look back, this taxation policy of the Government should be even more obvious. A moment ago, the Honourable Miss CHAN Yuen-han also mentioned that in 1980, corporate profits tax accounted for 60.5% of the total income from direct taxation. But in 1992, it dropped to as low as 48.5%. In contrast, the proportion of salaries tax has increased from 18.7% to 41.3%. No wonder some employees earning meagre income have been caught in the taxation net. Mr President, I would like to ask Honourable Members whether this taxation policy of the Government seeking to protect the interests of the business sector can be regarded as "proper management of finances"? In the past any proposal to reduce the rate of corporate profits tax would of course be most welcome to the business sector. However, whenever there was a proposal to increase the rate, they would raise various kinds of objections on the grounds that this would "hamper foreign investment and weaken the competitiveness of Hong Kong". As a matter of fact, low tax rate is not a main factor for consideration by the investors. Relatively speaking, what is even more important is the overall investment environment which includes: stability of society, soundness of the legal system, quality of labour, provision of skills and so on. Slight adjustment of the profits tax rate, in fact, will not alter the "low tax rate" nature of Hong Kong. In regard to the profits tax rates of the Four Little Dragons of Asia in 1994, it was 34% for South Korea, 27% for Singapore and 25% for Taiwan. Comparatively speaking, the 16.5% profits tax rate for Hong Kong was by all means still on the low side. However, the gap between the rich and the poor in Hong Kong is the widest among the Four Little Dragons of Asia. In this connection, Mr President, I would like to ask Honourable Members whether Hong Kong can be regarded as "prosperous and progressive"? Mr President, I would like to take this opportunity to specifically point out that Members from the Democratic Party, who always put it about that it is their responsibility to care for people's livelihood, have suddenly altered their image of defending the grassroots people this time by supporting the reduction of corporate profits tax. Do they really want to turn to speak for the interests of the business sector, or do they really believe that reduction of the corporate profits tax rate from 16.5% to 16% can greatly stimulate the economy of Hong Kong and speed up investment? I cannot figure it out indeed. In view of the high inflation rate of Hong Kong at the present moment, I reckon that increase of the proportion of corporate profits tax as a component of direct taxation can alleviate the pressure from the Government's increase of various kinds of indirect taxes and charges. This will have a positive effect on curbing inflation. Based on the belief of "fairness" and "redistribution of wealth", I request that the Government should increase the corporate profits tax rate by not less than 1%, and should increase the personal allowance for salaries tax to $96,000. Mr President, these are my remarks. MR RONALD ARCULLI (in Cantonese): Mr President, as a matter of fact, I wanted to speak last but, having thought it over, I think I had better speak earlier. It is because I would like to call on colleagues in the Legislative Council to support the Honourable James TIEN's motion while they are expressing their views. Some colleagues remarked that they would adopt a policy which says no to the original motion and the two amendments today. If this "triple no" policy is successful, it will turn out to be a policy which deprives us of the chance to play a part. Some colleagues said that the proposal of a tax break by the Liberal Party is unfair to wage earners who are paying salaries tax. Mr James TIEN suggested the lowering of the profits tax by 1.5%. 1.5% of 16.5% is roughly equivalent to 9% but against the 15% salaries tax, this 1.5% stands for 10%. As a matter of fact, the reduction in salaries tax for wage earners will be greater than that in the corporate profits tax. This is the first point. Secondly, Members may forget that in our meetings with the Financial Secretary in the last couple of weeks, he has provided us with a great deal of information. Where salaries tax is concerned, there are now some 1 million people paying salaries tax but the 100 000 people who pay salaries tax at the 15% standard rate contribute 58.7% of the total salaries tax. Is it fair that these 100 000 people who make up a mere 10% of taxpayers are paying 58.7% of the total salaries tax? The community or the media do not have much discussion or coverage on the Liberal Party's proposal regarding the tax band. Perhaps they know nothing of it or we were negligent in not letting them know. But we have expressed our views on the tax band and the personal allowance for salaries tax as well as the Government's budget. Yet, this debate today does not concern the Government's revenue estimate for next year. It is about what we should do under the existing economic environment in Hong Kong. Lastly, I would like to bring one thing to Members' attention. As we are making demands in respect of tax, different Members of different parties may have to vote in a way which is somewhat contrary to their own demands. Yet, under all circumstances, if Members support the amendment of the Honourable CHAN Kam-lam or that of Dr the Honourable LAW Cheung-kwok, I have the feeling that you will feel sorry for what you did sooner or later. (Laughter) If you support their amendments, the Financial Secretary will be very happy for this will close the door on further demands for a tax break. Such being the case, even though you do not support Mr James TIEN's motion, you must not support the amendment of Mr CHAN Kam-lam or that Dr LAW Cheung-kwok and please abstain when it comes to the vote on Mr James TIEN's motion so that we, the Liberal Party, will have a smooth transition. (Laughter) Thank you, Mr President. MR CHAN WING-CHAN (in Cantonese): Mr President, I will speak solely on the amendment proposed by Dr the Honourable LAW Cheung-kwok, not because his amendment is appealing but because many other Members have already spoken of many things. Mr President, in view of the fact that the Government has a huge fiscal surplus now, that there is a high unemployment rate in the territory, and that the general public, in particular, the labour sector, which constitutes the lowest class in the community, is now facing a comparatively difficult situation, the Federation of Trade Unions supports the concept of "returning wealth to the people" proposed by Dr LAW Cheung-kwok. That is to say, now that our society has such a need, the Government should inject part of the wealth amassed from society back to society. However, I have reservations about Dr LAW Cheung-kwok's proposal of distributing part of the wealth to the residents of Hong Kong on an equitable basis. The Federation of Trade Unions has always agreed that the wealth of society should be handled in line with the principle of redistribution. The poor and the vulnerable in society should be given particular attention whereas the rich should take up greater responsibilities for taking care of the poor and the vulnerable. In this connection, Mr LI Ka-shing and Mrs Anson CHAN whom Dr LAW Cheung-kwok mentioned earlier should not be the beneficiary of this proposal of "distributing money". Based on this principle, we do not agree that "returning wealth to the people" is tantamount to distributing wealth to residents of Hong Kong on an equitable basis. We are of the view that the wealth which is to be returned to the people should be given out to the poor, the vulnerable and the needy in our society. This end can be specifically achieved through specific social welfare and relief measures such as medical subvention or unemployment assistance. For this reason, I oppose the amendment of Dr LAW Cheung-kwok and support Mr CHAN Kam-lam's amendment. Mr President, these are my remarks. Download 0.94 Mb. Share with your friends:
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