Members present the president the honourable andrew wong wang-fat, O. B. E., J. P
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- MR FREDERICK FUNG
- MR YUM SIN-LING
- MR LEE WING-TAT
MR IP KWOK-HIM (in Cantonese): Mr President, two of my colleagues have today initiated motion debates in regard to the poor economic situation of Hong Kong and how to increase employment opportunities. We can see that these problems are really harassing the Hong Kong people. An accountable government definitely cannot sit by idly and remain indifferent. Entering 1995, the objective environment of Hong Kong has already changed. The industries and service trades in Hong Kong can no longer keep their favourable positions as in the past; the economy becomes sluggish and the unemployment rate keeps climbing. The newly announced real domestic economic growth for the second quarter marks a plunge to the lowest point in four years ─ only 4.8%, which is even lower than the figure in the Government's yearly forecast. The Financial Secretary reiterated that the present situation of Hong Kong cannot be regarded as economic recession, but only a slackening of the economy, while others described the present economic downturn as an inevitable phenomenon during the economic cycle. Yet this does not necessarily mean that we can stay put and silently wait for the chance to come along when the economic environment will recover naturally. We should also understand that recently the consumption desire of the public is very low, the market condition is inactive, some enterprises have closed down and some companies have to lay off their staff. The rise in the unemployment rate has brought enormous pressure to bear on society and affected the prosperity and stability of Hong Kong. Thus the Government should, with a positive and pragmatic attitude, work out a long-term strategy with a view to stimulating investment and creating more employment opportunities. In order to create a more favourable investment environment so that the local and foreign investors can feel at ease to invest here, first of all we must maintain the political stability of Hong Kong. During the past three years, Sino-British relations came to a deadlock due to the political package of Governor PATTEN. This has indeed weakened the confidence of not a few investors in the economic development of Hong Kong. Therefore, our urgent task at the moment is to restore the favourable investment environment of Hong Kong to win the confidence of the investors. At present, the Hong Kong Government is sitting on a huge amount of surplus. Apart from properly using the surplus to help those in need during economic recession, the Government should also use that amount to speed up the infrastructural projects, especially the construction of the new airport, in order to increase employment opportunities and to stimulate the economic activities of other trades. Besides, the Government can, having regard to the needs of the market, increase its investment in other aspects, for example, strengthening the research and training in respect of new scientific technology. Apart from the above, Hong Kong will also be similar to other economically developed countries in the sense that its economic development will be gradually dominated by the service industry. To be in line with the development of scientific and technological research as well as economic restructuring, the Government will have to allocate resources to expand and to improve the existing retraining programme so as to provide the market with the necessary manpower. At the same time, in regard to the education system of Hong Kong, efforts should also be put in to enhance the quality of the local workforce. I believe that after the investment desire of the business sector has revived under the Government's effective measures to stimulate the economy, the competitiveness of the economy of Hong Kong will be restored and more employment opportunities for the local workers will be created. Mr President, profits tax is a very important source of taxation income in Hong Kong. Hong Kong is one of the areas with the lowest profits tax rates in the world. I reckon that the investors have no reason to believe that the existing profits tax rate is a stumbling block to Hong Kong's competitiveness. The maintenance of the present profits tax rate will only render a brighter investment perspective to the investors. I am extremely surprised by the Democratic Party's support for a profits tax cut. Mr President, although the Democratic Party says that reduction of profits tax is to safeguard the interests of those entrepreneurs with medium to small scale businesses, this absolutely fails to cover up the Democratic Party's intention of currying favour with the major consortia. With these remarks, I support the Honourable CHAN Kam-lam's amendment to the motion. Thank you, Mr President. MR FREDERICK FUNG (in Cantonese): Mr President, the views of the Hong Kong Association for Democracy and People's Livelihood (ADPL) on this motion have basically been presented by Dr the Honourable LAW Cheung-kwok and the Honourable MOK Ying-fan in the course of the debate. I just want to respond to the remarks of some colleagues. First of all, I think the original motion moved by the Honourable James TIEN represents a policy of "three non-guarantees" in that: firstly, it does not guarantee what kind of spending the Government will be having. Why have I said that? It is because should there be a reduction of 1.5% in profits tax or salaries tax this year, then would it be next year or the year after next that tax rates be raised to make up for lost revenue? If it is next year that the rates be raised, then we would have a tax cut this year, a tax rise next year, and perhaps a tax cut again the year after next. This would make our tax system unstable, and the message conveyed would be unclear. Secondly, if there is not going to be a tax rise next year but only a 1.5% tax cut this year, and another 1.5% next year, that would mean a loss of $7 billion next year, and another $7 billion this year, making a grand total of $21 billion in three years. This is the first "non-guarantee". The second "non-guarantee" is that it does not guarantee that the people of Hong Kong can benefit from it. The Honourable Mrs Selina CHOW has just said that tax reduction makes it possible for the money to be retained in the pockets of members of the public. But just the pockets of which members of the public that she refers to? They are the pockets of major corporations of the business sector! They are the pockets of 200 000 high-income earners! With the present system of salaries tax, only 1.2 million out of the three million workers are paying tax, whereas 1.8 million are not. Furthermore, there are over one million people, including elderly people and recipients of Comprehensive Social Security Assistance (CSSA), who are jobless. Therefore, they cannot benefits from the tax reduction. For this reason, this motion will only bring the greatest benefit in relation to salaries tax to 200 000 high-income earners. If there is money to be retained in people's pockets, it is to be retained in these people's pockets. This is the second "non-guarantee". The third "non-guarantee" is that there is no way of guaranteeing that these people will make investments, unless this tax reduction measure is accompanied by a provision that money saved in this way will have to be invested on pain of breaking the law. Given that there is no such a basic condition, how can it guarantee that these people will re-invest? My view is that even if they make re-investments, the re-investments will probably be another manufacturing plant to be set up in mainland China instead of in Hong Kong. So, I think these "three non-guarantees" are not acceptable. I wish to add to Dr LAW Cheung-kwok's comments concerning the returning of wealth to the people. First, where does the money come from? According to the Financial Secretary, in 1991 it was estimated that there would be $78.1 billion in fiscal reserves in 1995-96. But the amount is already $144 billion now, and it has not even included the $8 billion or more in the Land Fund. The point is how this money should be utilized, irrespective of how the Government has accumulated it. We feel that there is the need to set up a mechanism to prevent the money from being squandered away. We feel that we ought to make sure that there is sufficient reserve to meet public expenditure for one year before we may make use of the remainder. But the question is how it can be made use of? We feel that the target group to benefit from returning wealth to the people is "people", not poor people or rich people, but Hong Kong people. If you happen to be a Hong Kong citizen, you will be entitled to it. This is a matter of right. No one can say for sure whether the $20 billion comes from salaries tax, profits tax or land sales. Perhaps there are people who work very hard, only to earn very meagre wages, whereas some money is in fact not available to them. For this reason, I feel that people should have the right not just because they are poor, for if that should be the case, this motion should not be like what it is; instead, it should be rewritten as a motion to increase the CSSA. Second, according to some people, a number of labour organizations have pointed out that this move, though it bypasses the tax system, would have the effect of redistributing wealth. But this motion is not asking for a redistribution of wealth. This motion does not seek to do that. But is it the affect that the motion does not in the least seek to do that? Not exactly so. Why is it? It is because when everybody gets $5,000, Mr LI Ka-shing gets $5,000, and I get $5,000, too. In terms of proportion, what I get is clearly more than Mr LI Ka-shing's. Therefore it is not exactly the case that it will not effect a redistribution of wealth, only that the effect is not very marked. But one cannot say that there is no such effect. This is the second point. The third point I want to raise is whether Dr LAW Cheung-kwok's motion will help economic development and increase employment. If I remember correctly, Hong Kong's GDP comes to about $1,000 billion. So, $20 billion is equivalent to 2%. If we ensure that all $20 billion is spent, the GDP of Hong Kong will then rise by 2%. Now in what way should we achieve that? Giving out money is one way, the spending coupon mentioned by Dr LAW Cheung-kwok just now is another as it ensures that the entire amount can be spent. This is a way which clearly will increase economic growth. The question is whether or not, in the cycle of economic growth, job opportunities can be created. And that will depend on what estimation Members as well as we, the ADPL, are able to make. It is our estimation that it can, and therefore what we propose is relevant to the subject. There are people who say that such kind of proposal was unheard of. Things unheard of are not necessarily things that people in the world have never done, and things never done by people in the world are not necessarily things that cannot be done. This has been done in Singapore. Members may find it laughable, but Members might not have known that in Singapore, about $200 to $300 in Singaporean currency is put aside as provident fund. In Alaska, the same has been done. But since when did Alaska begin to do it that way? Years ago I happened to visit Alaska, and I saw that there was a sudden and sharp rise in the financial assets of the State Government of Alaska after Alaska had struck oil. So, the State Government gave each Alaskan citizen who had resided in Alaska for over one year US$300 to US$400 at the end of every year, and in 1991, the sum was raised to as much as US$1,000. Should we laugh at Alaska for its ignorance or stupidity? Such a move might have its political purpose, for example, the extra money might have been used to achieve some economic or political purpose. But this is something that can be achieved, and we must not conclude too soon that it cannot be done. So, apart from the above few points I have made by way of views added, I would agree with the amendment motion moved by the Honourable CHAN Kam-lam. By agreeing, I mean that our principles are in fact the same, and they differ only in form. He asks for an increase in tax allowances, which in essence is actually giving out money to members of the public. The difference lies merely in how the money is to be given out to members of the public. His way is to take less from the people, and my way is to give them money directly. It is just a matter of difference in form, but the principles are the same. For this reason, I cannot see why Members would oppose it. Conversely, let me ask the Honourable Fred LI this. As he often asks for more tax allowances whenever he speaks, why then should he oppose the motion moved by Mr CHAN Kam-lam? I would like to add this ─ I am really disappointed with the view taken by the Democratic Party. The Democratic Party keeps saying to us that it hopes to have consensus politics. But when I look back, I find that many a time the consensus was reached with the Liberal Party. So far, none has been reached with us the ADPL. The consensus politics we see now is clearly for the benefit of the business sector. I am not against the business sector, but just do not let members of the public come away empty-handed. I often say this: "Who can rival the Liberal Democratic Party?" It is a sure win for the Democratic Party because the total number of votes of the two parties put together is 29. I hope that the Democratic Party can look again more carefully at this motion which is about profits tax and salaries tax, and not about training, CSSA and so on as the party has claimed. These are items for debate in the Budgets to come, whereas today is not a rehearsal for the Budget debate. Let us look at the motion more carefully and note that it is about the huge reserve. Secondly, in what way can we achieve our goal which is the promotion of economic development and increase of employment opportunities? One way, for example, is to reduce tax, and what we are arguing for is to give out money. This is indeed the very subject of this debate. So, I hope that the Democratic Party can reconsider whether it can reach a consensus with us. MR YUM SIN-LING (in Cantonese): Mr President, I also think that the reduction of profits tax will not directly increase investment and job opportunities and so it cannot achieve the purpose of stimulating the economy. Earlier on, two Members from the commercial sector who fully understand the operation of the capitalist economy have also expressed the view that reducing profits tax will not necessarily increase investment. Besides, we have to understand that if we reduce profits tax this year, we will not be able to increase it substantially straightaway once we feel the need to raise it because this will cause the Government to increase other charges and salaries tax in the future as compensation. Therefore, even if we reduce both profits tax and salaries tax today, there will still be hidden chances of causing harm to the lower class in the future. I believe people support the reduction of profits tax mainly because they are aware that the Government is holding a huge amount of reserve and they wish to stimulate the economy by increasing investment. If so, I would rather suggest the Government follow the examples of Taiwan and Singapore and try to attract investment by means of the introduction of "tax holiday" (for example, by giving a tax-free period of five years), especially in attracting investment in the so-called "high and new" technology industries. The experience of Taiwan and Singapore shows that the introduction of tax holiday will not only be beneficial to the employment of workers and the economy, but will also contribute greatly to the improvement of industrial technology and the prevention of such technology from diverging from the world standard. Therefore, I think this kind of "tax holiday" can be introduced in Hong Kong. For example, trading companies and companies providing services which employ more than 50 people or manufacturing companies which employ more than 100 people can be given a tax-free period. This will not only facilitate the industrial transformation of Hong Kong, but also fill up the empty space left by the relocation of industries out of the territory. In this way, job opportunities can really be created. I agree to the basic spirit of Dr the Honourable LAW Cheung-kwok's amendment, but I also agree that it is meaningless to distribute money to people in the middle and upper income bracket. Therefore, if consumption coupons really have to be distributed to the public, I suggest that they be distributed to the following three classes: 1. All elderly people aged 60 and above, as an expression of gratitude for the contributions they have made to Hong Kong; 2. All recipients of the Comprehensive Social Security Assistance; 3. All tax-payers who have paid tax for three years or more, as a little reward to them for fulfilling their responsibility because many high income earners in the community do not pay any tax, for example, vendors in the market may earn tens of thousands of dollars a month. Therefore, those who have complied with the law and have paid tax for three years or more should be rewarded. Perhaps some people will still be asking the question of whether distributing consumption coupons will involve giving such coupons to the wealthy people. The answer is yes, but we do not have to worry about this because, if consumption coupons are distributed, the charitable organizations will naturally ask the rich to donate their coupons and I believe many of them will be happy to do a favour at little cost to themselves. Mr President, although I know that Dr LAW Cheung-kwok's amendment will not be carried, it does not mean that his proposal is bizarre. If certain revisions can be made to his amendment, it will still have something to recommend it. Mr President, these are my remarks. Thank you. MR LEE WING-TAT (in Cantonese): Mr President, initially I did not intend to speak. However, after hearing the Honourable Frederick FUNG's speech, I would like to respond. First, Mr Frederick FUNG said there was no consensus. In fact, there is consensus between the Democratic Party and the Hong Kong Association for Democracy and People's Livelihood. Both parties agree to raise the personal allowances of salaries tax and the rates of the Comprehensive Social Security Assistance and to increase the supply of public rental housing units. As far as politics is concerned, both parties approve of democracy. Perhaps Mr FUNG has forgotten about these. During this week, there have been differences of opinion, but it cannot be said that they are totally incompatible. The Honourable Miss CHAN Yuen-han has mentioned the issues of profits tax and public expenditure to which I would like to respond. Miss CHAN Yuen-han said that from the late 1980s to the early 1990s, when the Government started to reduce profits tax, it reduced public expenditure as well because it did not have money. I believe the Financial Secretary does not agree to such analysis. Neither do I. That is because the public expenditure philosophy of both the former and the present Financial Secretary has nothing to do with profits tax at all. The growth of public expenditure, including that of our social welfare, housing and education, is related to the growth of our Gross Domestic Product (GDP). Therefore, an increase of profits tax will not necessarily mean an increase of public expenditure. Public expenditure will not increase in this way unless the Financial Secretary has abandoned his practice of pegging the growth of public and government expenditure to that of the GDP. That is precisely the so called "golden rule" which the then United Democrats of Hong Kong, the Meeting Point and the present Democratic Party have asked the Financial Secretary, whether he be Sir Hamish MACLEOD or Mr Donald TSANG, to break or abolish over these four years. This rigid method of increasing public expenditure will really reduce the expenditure on social welfare for the lower class. Therefore, I hope Miss CHAN Yuen-han can understand that at present the growth of what is known as public expenditure and social welfare has nothing whatsoever to do with the increase or reduction of profits tax. Finally, many colleagues including the Honourable IP Kwok-him, Mr CHENG Yiu-tong and Miss CHAN Yuen-han have observed that it looks as if the Democratic Party is not helping the lower class this time. I hope that when we are considering the motion and our speeches, we can have a clear understanding of a few things. First, the overall emphasis of our speeches is to increase the tax allowance for employees in general. According to our calculations, I propose to give the employees an increase of tax allowance which is higher than the 1% or 0.5% reduction in profits tax that we have proposed. In other words, as regards tax concession, we propose to look after the interests of this category of tax-payers first. On this point, I do not agree with my colleagues from the Democratic Alliance for the Betterment of Hong Kong who are arguing that it seems we are not looking after the interests of the grassroots. As far as this question is concerned, people can see for themselves what our views are on such issues as the termination of importation of foreign labour, the increase of expenditure on public housing, or even the payment of the Comprehensive Social Security Assistance Scheme in so far as it relates to the relaxation of the upper limit of cash or the base figure for assets. Perhaps some colleagues are wondering why the Democratic Party is suddenly having a discussion on the reduction of profits tax. First, we have to discuss what the objectives are behind the general taxation philosophy of the Government. According to the Government's taxation philosophy, first, there has to be sufficient revenue to pay for the recurrent and non-recurrent expenditures; second, there has to be sufficient surplus so that there will be improvement and growth in both kinds of expenditure each year; and third, we should have sufficient reserve to face any crisis and be able to provide a safety net in times of difficulty so that government expenditure will not be adversely affected. We agree that there should be such a buffer effect. Let us take a look at the tax revenues of the Government. Even after all of the three conditions have been satisfied, the present situation is that there is still a lot of money in the Government's pocket. We would like to ask what the Government is going to do with such a large amount of money. A surplus amounting to more than $100 billion that we are having will already be sufficient to pay for the recurrent expenditures for a year. Yet the Government is intent on collecting more money each year. What really is the Government going to do with the money? That is the question and we are not asking for the reduction of profits tax for its own sake. We wish to discuss whether the revenue collected by the Government has already exceeded what is needed. Earlier on, the Honourable LEE Cheuk-yan mentioned reducing the tax burden of businessmen. That is the main reason why the Democratic Party proposes to reduce profits tax. As far as profits tax is concerned, we propose to have a reduction of 1% for businessmen who earn a small profit in order to achieve this purpose. I hope that we will not presume that all businessmen are wealthy. Hawkers selling vegetables in the market, public light bus drivers, taxi-drivers and the small businessmen will not be earning any huge amount of profits each year. Therefore, it is wrong to say that asking for a general reduction of profits tax is helping the big businessmen. Some colleagues said that as regards profits tax there would certainly be other ways to help the small businesses and businessmen. I entirely agree. However, the question is whether we should set down any principles. Having set down the principles, we hope we can then take measures and discuss the matter. Mr President, I would not go into further detail. However, I think the crux of the question is what we should do to give tax concessions to the small businessmen and the employees having regard to the has huge reserves that the Government has amassed. Thank you, Mr President. Download 0.94 Mb. Share with your friends:
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