Members present the president the honourable andrew wong wang-fat, O. B. E., J. P
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- DR PHILIP WONG
- MR LAW CHI-KWONG
- MR CHEUNG HON-CHUNG
- DR HUANG CHEN-YA
- MISS CHAN YUEN-HAN
MR LAU CHIN-SHEK (in Cantonese): Mr President, the motion moved by the Honourable James TIEN today seeks to stimulate our economy. He thinks that this is beneficial to Hong Kong as a whole. What is it all about? Let us look at the other propositions of Mr TIEN as well as the Employers' Federation of Hong Kong and the Hong Kong General Chamber of Commerce. Let us see whether their overall plan is in compliance with the interests of Hong Kong as a whole, and see who will actually benefit from their propositions. Mr TIEN, the Employers' Federation of Hong Kong and the Hong Kong General Chamber of Commerce have three main propositions: 1. Suppression of employees' wages to negative growth; 2. Unlimited quota of labour importation; 3. No opposition against the increase in fees and charges by public utilities. What benefits would the suppression of employees' wages to negative growth bring to Hong Kong? What benefits would the unlimited quota of labour importation bring to Hong Kong? And what benefits would no opposition against the increase in fees and charges by public utilities bring to Hong Kong? Owing to the above reasons, there are no grounds for me to believe that the motion of Mr TIEN is going to benefit Hong Kong. This, coupled with the reduction of profits tax, comes close to being a stimulation of our economy, as claimed by the business sector. But this finally suppresses people at the lower-middle level of our community and benefits the employers. Profits tax is only payable when businesses generate profits. The rate of profits tax in Hong Kong is the lowest among the "Four Little Dragons in Asia". As a matter of fact, the amount of profits tax now paid by the 10 major listed companies in Hong Kong accounts for about 30% of the gross profits tax payable ($50 billion). If the rate of profits tax is being cut by 1.5%, the 10 major companies earning huge profits will thus pay less profits tax to the tune of $1.5 billion. Profits tax is an important part of a budget. If the profitable business sector pays less profits tax, the tax revenue will have to be supplemented by the employees. There is a common saying among Hong Kong that the employees are working for the banks and the property developers; for the sake of getting a shelter, they have to make mortgage payments. Why should we still give the business sector tax subsidies to lessen their responsibility of repaying the community? The business sector always says that the employers and the employees have to be mutually dependent, and this has just been mentioned again by some Members. I agree to this statement. This statement points out a fact that if profits are made, they should be shared by both parties; if profits are not made, both parties have to endure this together. However, Mr TIEN's motion and the recent moves made by the business sector make us understand once again that if profits are made, the employees will be the last to benefit; if no profits are made, the employees will have to tighten their belts as they are the first to suffer. On the contrary, the employers are given tax reduction while the public utilities are granted fees and charges increase. This is not dependence of employers and employees on one another. This will only aggravate the confrontation between the two parties and is not beneficial to Hong Kong. I would ask Mr TIEN, the Employers' Federation of Hong Kong and the Hong Kong General Chamber of Commerce to think thrice before they act. Mr President, I so submit. DR PHILIP WONG (in Cantonese): I have heard of stimulating the economy by means of relaxing the money supply and lowering the interest rates, but I have never heard of stimulating the economy by lowering the tax rates. It is because even if the tax rates were to be reduced to zero, it would not be helpful at all to companies or people who simply need not pay tax. As to the amendment motion proposed by Dr the Honourable LAW Cheung-kwok, I entirely agree with the arguments put forward by the Honourable ERIC LI, and therefore I do not want to say any further. Thank you, Mr President. MR LAW CHI-KWONG (in Cantonese): Mr President, today, I want to play the role of a fortune-teller for the economy of Hong Kong. The diagram I hope to get is one of Jiji, which depicts water on top and fire underneath, signifying an embodiment of complementary elements known also as Likan. The Government has been refusing to believe that the economy of Hong Kong is facing a crisis, and it even thinks that a 5% economic growth in real terms is satisfactory. I think most Hong Kong people, including Members of this Council, would agree that the economy of Hong Kong is slipping towards a slump. That being the case, and also because of the confidence problem in the run-up to 1997, the economy of Hong Kong will have to face even greater crises if we still do not take any actions now. Quite a number of my colleagues in this Council have just spoken on the economic problems Hong Kong is now facing. I now briefly summarize them as five points: - low desire for re-investment; - beginning of a dangerous ebb in consumer spending; - gradual rise in the unemployment rate; - widening of the gap between the rich and the poor; - high inflation. In many of the debates going on in recent days, we have heard quite a lot of different views. There are proposals on stimulating the economy, which, unfortunately, fail to take account of the gap between the rich and the poor; there are other proposals on stimulating consumer spending by enhancing the redistribution of resources, which, again very unfortunately, also fail to consider the possible effects of accelerating inflation. The rich hope that workers will ask for less salary increase, while workers hope that the rich can pay them more. In the Hong Kong of today, do we really have to single out the so-called class conflicts before we can solve our problems? If we are to solve the problems confronting us today, we must realize that all of us, who are in the same boat, should help one another out. In the Policy Address debate, I proposed that the business sector should work with the labour sector to strike up amicable labour relations. Today I also urge people from various classes to work towards bringing about a harmonious community, in which they co-operate actively to prepare Hong Kong for the advent of 1997 and the 21st century. The Democratic Party has prepared quite a number of recommendations, and my colleague will discuss them in detail later on. But, let me just say here that the recommendations made by the Democratic Party are in essence a four-point programme, the ingredients of which complement one another, like water and fire in the Jiji diagram: Firstly, to boost consumer spending, we advocate a substantial reduction in income tax by increasing tax allowances and widening the tax bands. Secondly, since boosting consumer spending will push up inflation, we propose at the same time that government fees and public utilities charges be freezed to curb inflation. Thirdly, we advocate a mild reduction in the rate of profits tax as a means of increasing investors' confidence in our low and stable tax rates, in the hope that this can boost re-investment and create job opportunities. Fourthly, in order to reduce the unemployment figure, we advocate that Hong Kong should abolish the labour importation schemes so as to enable displaced workers to seek alternative employment easily and to have a reasonable share of the fruit of our economic progress. Boosting consumer spending and re-investment is suggestive of "fire", symbolizing forces that are too drastic; freezing fee increases, on the other hand, is suggestive of "water"; a combination of water and fire will constitute a complementary situation. Halting labour importation and thus allowing the local labour market to adjust by itself conforms with the concept of yin and yang and will work as an effective remedy to narrow the gap between the rich and the poor. Mr President, playing the role of a fortune-teller, just for today, I wish the economy of Hong Kong the best of the luck and fortune. These are my remarks. MR CHEUNG HON-CHUNG (in Cantonese): Mr President, two Members have one after another proposed to amend the original motion moved by the Honourable James TIEN. The motion and amendments moved by these three Members have one thing in common, that is, under the circumstances of an economic slowdown, the Government should use its reserves appropriately to stimulate the economy and to create more job opportunities. No matter which proposal the Government chooses to adopt, it has to make fiscal commitments. How should the money be spent? We should consider this carefully. The three different proposals would produce three different kinds of results and effects. May I ask Members where the resources should be injected in order to produce the effects initially mentioned by Mr James TIEN? Should money be spent on the industrial and commercial sector or on the well-off people or should everyone have the right to enjoy these resources regardless of their financial status? Or do we want to appropriate the resources to those who are adversely affected by the depressed state of our economy so as to increase their propensity to spend once again and then stimulate our economy? Mr President, let us analyse the three different proposals carefully. The Democratic Alliance for the Betterment of Hong Kong (DAB) thinks that money should be spend on the grassroots people because they are the ones who are most vulnerable in an economic downturn. Initially, this group of people have a certain propensity and ability to spend. However, their propensity to spend has been reduced in tandem with economic depression and therefore, if money is spent on these people, their propensity to spend will certainly be revived and the economic slowdown will be alleviated. Mr James TIEN has proposed to reduce corporate profits tax and salaries tax. Everyone knows that Hong Kong is already one of the places in Southeast Asia and in the world which has the lowest rate of profits tax. Reducing the rate of profits tax will not enhance the propensity to invest at all, it will only increase the profits made by enterprises and companies which are already making profits. I believe Mr TIEN is a grateful and kind-hearted employer and the profits made by his company would be distributed reasonably to his employees. However, other employers may not be the same. Consider the proposal made by the Hong Kong Trade and Industrial Organization and the Employers' Federation of Hong Kong to keep the rate of pay rise next year below that of inflation. I believe most employees would know fairly well how things stand and they would lose confidence in their employers. These two proposals will only make the industrialists and the businessmen even richer, and this will not be of benefit to the grassroots people at all and they will not have a greater propensity to spend. Reducing the rate of salaries tax will not benefit the general public because, under the present taxation system, more than half of the population do not have to pay individual salaries tax. As the tax rate is progressive, tax paid by earners of high salary already constitutes a majority of the salaries tax collected by the Government. Reducing salaries tax will only be beneficial to the earners of high salary and most people will not be benefited. For the earners of high salary, this will only be gilding the lily. Apparently, riches will then be centralized in the hands of a minority of the community and the disparity between the rich and the poor will be widened even further. As this is not what we want to see, the DAB and I will not support Mr TIEN's motion. As regards the amendment proposed by Dr the Honourable LAW Cheung-kwok, he has changed the proposal of "distributing money" into one of "distributing consumption coupons". That may well have a theoretical basis from the angle of economics, but in practice, riches may then be found in the pockets of those who are not in need. To those who are already earning a high salary, this is only gilding the lily and it will not make any difference. Although Dr LAW's proposal is well-intentioned and similar measures have also been adopted by Alaska and Singapore, it is contrary to the spirit of us, Hong Kong people, who strive to lay the foundation of businesses through our own efforts. We have to uphold the spirit of Hong Kong people and therefore I cannot agree to Dr LAW's motion. The DAB's amendment put forward by Mr CHAN Kam-lam which urges the Government to "make good use of its fiscal reserve and raise the personal allowances for salaries tax" is worth supporting and is the most desirable proposal out of the three proposals. I hope that this amendment can be carried so that the grassroots people will be benefited and those who used to pay salaries tax will no longer have to do so such that they can have spare resources which can be used on consumption. The heightened propensity to spend will then stimulate economic development and benefit the general public as well as the employers in the industrial and commercial sector. Therefore, Mr CHAN Kam-lam's motion is the most desirable one out of the three and I urge my colleagues to lend their support to the DAB's motion. Mr President, these are my remarks. DR HUANG CHEN-YA (in Cantonese): Mr President, the GDP growth rate in the second quarter as announced by the Census and Statistics Department was only 4.8%, the lowest in four years. It is small wonder that the people of Hong Kong have lost confidence in their economic prospects. As is widely known, the Government of Hong Kong has been upholding the principle of non-intervention, and will not therefore resort to fiscal measures as a means of economic adjustment. However, at a time of economic slowdown coupled with a high unemployment rate, how can Hong Kong overcome the difficult situation when the Government totally ignores the functions of fiscal measures, reduces the Budget to nothing more than an accountant's books and hoards up huge fiscal reserves instead of using the money for any meaningful purposes? Therefore, the Democratic Party puts forward a series of proposals on tax concessions and public expenditure aimed at speeding up economic recovery and creating more employment opportunities. The Honourable LAW Chi-kwong has already mentioned some arrangements to tie in with these tax concessions. I will focus on schemes of boosting the economy and my other colleagues will talk of plans to ease the tax burdens of the lower and middle classes. The schemes proposed by the Democratic Party to boost the economy include reduction of the profits tax as well as using tax concessions to encourage manpower training and promote the development of the manufacturing industry. As regards the profits tax, the Democratic Party's proposal is different from that of the Liberal Party. We think that during the economic slowdown, small and medium-sized businesses are facing a more difficult situation than big enterprises. They may have difficulties in obtaining loans and thus face liquidity problems. It must be noted that the businesses in Hong Kong are mostly small and medium-sized and such businesses together employ more people than big enterprises do. In view of this, we suggest adopting a progressive profits tax system to encourage profitable small and medium-sized businesses to accumulate more capital for expansion or future development. We suggest lowering the tax rate for the first taxable $1 million by 1%, that is, from 16.5% to 15.5%, and by 0.5% for all subsequent taxable amounts. Some Members may well criticize that even if the profits tax is lowered, businesses may not necessarily plough their profits back into further investments in Hong Kong. Criticisms of this kind are in fact based on the assumption that the businesses in Hong Kong always want to pull out. Given such an assumption, it may well be a waste of efforts to ask the Government to formulate industrial policies and establish a science park! Therefore, we think that such an assumption really cannot help much. Rather, we should take active steps to create a more favourable environment that can prevent further business failures and attract more investments. Cost-wise, cutting the profits tax has more advantages than the "cash pay out" scheme proposed by the Hong Kong Association for Democracy and People's Livelihood (ADPL). According to the Government's estimation, lowering the profits tax by 1% will reduce the Treasury's revenue by $2 billion in one year. This is far lower than the cost of the ADPL's proposal, which involves the paying out of $20 billion in one year. Effect-wise, the Democratic Party's proposal of lowering the profits tax is definitely better than the ADPL's "cash pay out" package as well. Dr the Honourable LAW Cheung-kwok says that the "cash pay out" package can directly stimulate consumption and boost economic growth by 1.5%. But, the Democratic Party believes that with a cut in the profits tax, businesses can use their tax savings to invest in machinery, create more employment opportunities or maintain wage growth. All these will increase local capital investment and consumer spending, in addition to reducing the number of unemployed workers. Such chain reactions will boost GDP growth, and speed up economic recovery, thus generating more tax revenue for the Government in the end. The Democratic Party is convinced that under the current economic slowdown, lowering the profits tax is an important factor that can contribute to restoring economic growth. Therefore, I cannot support the Honourable CHAN Kam-lam's amendment. Mr President, I want to stress two points: First, the Democratic Party's package of proposals is different from that of the Liberal Party in that it includes not only the lowering of the profits tax, but also the provision of other tax concession measures aimed at assisting various businesses, such as making a company's research and development spending 200% tax deductible, subject to a ceiling to be set at 20% of the company's total profits. Another tax concession measure applies to machinery and equipment depreciation, and this involves raising the initial tax allowance from 60% now to 80%, as a means of encouraging investment in machinery and manpower training. Second, the main purposes of our profits tax reduction proposal are, first, to encourage small and medium-sized businesses to develop themselves to meet current economic circumstances, and, second, to set up a profits tax regime oriented towards assisting businesses in dealing with the economic transformation. Therefore, I hope that the Democratic Alliance for the Betterment of Hong Kong and the trade unions will support the Democratic Party's proposal to lower the profits tax. On the other hand, the strengthening of manpower training has become a pressing issue in view of the need to maintain Hong Kong's competitive edge. The Democratic Party suggests the creation of a tax concession for personal training, and this is to be offered to middle and lower-level employees as a means of encouraging them to further their studies. Similar tax concessions are also offered in countries like Singapore and Malaysia. Furthermore, to encourage companies to provide staff retraining courses, especially for middle-aged and lower-level employees, we propose that the course spending involved should be made 150% tax deductible. Of course, it takes more than just tax measures to revive the economy. Therefore, as regards public expenditure, the Democratic Party thinks that the Government should inject capital into the Employees Retraining Board to train workers and also to set up a "skills training fund" to encourage businesses to provide on-the-job training for their staff. Mr President, such tax concessions and capital injection for retraining are all better than paying out money that can only serve a one-off purpose. Our proposal, on the other hand, will create long-term opportunities for employees to make a living. At the same time, we also think that the Government must allocate more resources to assist the development of businesses. We will dwell on this in the next debate. As for the salaries tax, the Democratic Party proposes to increase the tax allowance and widen the tax bands instead of abolishing the standard rate. My other colleagues will speak on all these aspects. MISS CHAN YUEN-HAN (in Cantonese): Mr President, I would like to speak on the Honourable James TIEN's motion and I would respond to the speech made by Dr the Honourable HUANG Chen-ya of the Democratic Party. If the Government is to administer the right remedy, so that the entire society can be benefited, there are a couple of things that the Government should do: seriously review the taxation system of Hong Kong; strengthen the progressive scale of levy in the existing taxation system, so as to promote vertical fairness; increase the personal allowance for salaries tax and widen the tax band. However, I cannot agree to the proposal of Mr James TIEN, which urges for a cut in the corporate profits tax. I also do not share the opinions expressed by the Democratic Party Members. At the present stage, how can our problems be solved? I would like to cite some figures for discussion with Members. In fact, is it a must that we agree with the Democratic Party and with what it suggested in Mr James TIEN's motion in that the corporate profits tax has to be cut? There are many people in the community who have recently attacked the standpoints of the two political parties. Only companies which make profits would have to pay profit tax. Therefore, a cut in profits tax will have no effect on the medium or small-sized enterprises or on those companies which are not making profit at all. If we cut the rate of profits tax at this time, it will run against the fiscal objectives of the Government. To our understanding, the public expenditure of Hong Kong will have a direct bearing on the economy and social development of Hong Kong, and that will have positive or negative effects on the livelihoods of the people of Hong Kong. Tax revenue is the major source of public money. When there is surplus, we should consider how to use the surplus in a pro-active manner with a view to promoting the livelihoods of the community and creating employment opportunities. We should not cut the source of revenue in furtherance of personal interests under the pretext that there is a surplus. We may look at some figures. I hope that those political parties which care for people's livelihood will, together with us, probe and analyse them. In the financial years from 1986 to 1989, the Government, on the pretext that there was a surplus, cut the profits tax a number of times to the effect that the rate of profits tax dropped from 18.5% in 1986 to 16.5% at present. I believe that Members may recall that during the early 1990s when the financial situation of the Government was tight, government expenditure was squeezed numerous times. The expenditure in the area of social welfare was cut drastically to meet the enormous expenditure incurred by the infrastructure projects. The Government then found itself in a fix in face of the limited amount of fiscal reserves available following the repeated profits tax rate cuts. The emergence of this problem is precisely the result of the short-sightedness of the Government, its favouritism towards the business sector and some people's failure to see the root of problems. All this has led to neglect of the well-being of the people. If the Government had been far-sighted then and had not taken the hasty decision to reduce the already low rate of profits tax, we believe that in the early 1990s the people of Hong Kong would not have had to bear the additional burden caused by the austerity programme. Mr President, the objective behind the fiscal management policy of the Government is to promote the harmonious development of our society. I agree entirely with the Honourable LAW Chi-kwong in that we are in the same boat and we should strive to keep it afloat, thereby ensuring everyone a pleasant place to live and work in. However, when there is a surplus, we lower the rate of profits tax and cut the revenue of the government instead of improving people's livelihood. And when the financial situation is tight, the well-being of the general public is sacrificed by reducing the social welfare services available to the public. What kind of financial management principle is it? What sort of principle is it? Is it true that we are in the same boat and we work together to keep it afloat? I really want to know. This is only a typical manifestation of the principle of protecting the interests of the business sector and bullying the grassroots people. Furthermore, I believe that if we lower the rate of profits tax at this time, it will run against equitable principles. Some people question why I support the raising of the personal allowance for salaries tax but at the same time oppose the lowering of the rate of corporate profits tax. This point in fact was made by the Honourable Henry TANG who, when referring to the Honourable CHAN Kam-lam's speech, said that it was a specious argument that we allow the raising of the personal allowance for salaries tax but oppose the lowering of the rate of profits tax. I would like to say to those colleagues who belong to the business sector, other Members from other political parties in this Council and even to you, Mr President, that the taxation system of Hong Kong lacks horizontal fairness. The "wage earners" territory-wide have been taking up more and more of the tax burden while the tax burden on the business sector is lessening. Mr President, my argument is based on statistical figures. In 1980-81, profits tax accounted for 60.5% of the total income from direct taxes while salaries tax accounted for 18.7%. In 1992-93, the share of profits tax dropped to 48.5% while the share of salaries tax rose sharply to 41.3%. We may well say that the burden on the shoulders of the "wages earners" has been intensifying. I believe that Mr President will also agree with me. At the same time, the burden on the business sector is lessening. Why should the business sector be generously treated while the "wage earners" have to be sacrificed? Why did Mr Henry TANG and some other colleagues in this Council say such things? I am furious. Faced with such an unfair and unreasonable situation, I urge those groups or individuals who claimed that they would help the "wage earners" to request the Government to increase the personal allowance for salaries tax. I also urge those colleagues in this Council who have claimed that they are concerned with people's livelihood to oppose the motion moved by Mr James TIEN, now that the gap between the rich and the poor is widening. Only in so doing can they honour their promise. Lastly, I would like to reiterate that tax revenue is the source of revenue of the Government. This is also the tool with which the wealth of society can be redistributed. The taxation system should develop in a fairer direction instead of in a retrogressive direction. The reform of the taxation system should aim at promoting the redistribution of wealth in society instead of further widening the gap between the rich and the poor. In view of this, I believe that the Government should conduct a comprehensive review of the taxation system and should not lower the rate of profits tax. Instead, the rate of profits tax should be lifted by more than one percentage points. I believe it is high time for the Government to use the taxation system to enable the wealth of society to be more evenly distributed. Mr President, with these remarks, I oppose the motion moved by Mr James TIEN. Download 0.94 Mb. Share with your friends:
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