Members present the president the honourable andrew wong wang-fat, O. B. E., J. P
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- MR ANDREW CHENG
- MR LEE CHEUK-YAN
- DR SAMUEL WONG
MR MOK YING-FAN (in Cantonese): Mr President, today, we are supposed to discuss how to improve Hong Kong's economy and the labour problem. But having listened to the debate more carefully, I find that what Members have been discussing is really the question of "money". I think Members know it very well that once we come to talk of money, what one will say depends on what position one is in. The businessman of course hopes that profits tax can be reduced because as he makes more money, he will wish he could pay less tax to the Government. However, I believe that to the general public, this is very unfair. Later on, we may have to pay more even for taking a public light bus because the Government is talking about improvement to air quality, so that when public light buses switch to petrol, the cost will certainly be passed onto consumers, that is, those who take public light buses. Mr President, over the past 20 years, with the rapid developments in technologies, transport and computer information, the world has evolved into a single market. Hence, Hong Kong's economic competitors are from places all over the world. Nevertheless, the Government has failed to make suitable overall and forward planning according to the developments in the world market, and what is more, inappropriate development policies in respect of population and human resources have been adopted. The result is that the workers of Hong Kong have fallen victim to shaky political confidence and the rapid structural transformation of the industrial and services sectors, so that the unemployment rate keeps on rising. However, the basic conditions and assumptions on which the Honourable James TIEN bases himself in dealing with the two current and major issues of Hong Kong's economic slowdown and unemployment are: (1) since Hong Kong has a huge accumulated fiscal surplus, it is not necessary at this stage to maintain the growth of the fiscal surplus by means of maintaining the profits tax rate and the salaries tax rate; (2) the profits tax rate and salaries tax rate of Hong Kong are too high and they affect the economy of Hong Kong and result in an unfavourable business environment. On the first point, we of the Hong Kong Association for Democracy and People's Livelihood (ADPL) agree only to the extent that, with Hong Kong's huge accumulated fiscal surplus, we should make good use of it to boost spending in Hong Kong, promote economic development and create job opportunities. For this reason, the ADPL proposes to "return wealth to the people" which is meant to stimulate Members' thinking in this aspect. But we have to make it clear that "returning wealth to the people" is not the only means to the above end. What we hope is that through discussions and drawing on the collective wisdom of this Council, we can endeavour to achieve the above end. However, the ADPL does not think that lowering the profits tax rate and salaries tax rate can effectively promote the economic development of Hong Kong and create job opportunities. As a matter of fact, the present unsatisfactory economic and investment environment of Hong Kong has led to stagnation of economic development and unemployment of a large number of workers. Just as I said at the very beginning and according to DR the Honourable LAW Cheung-kwok's analysis, the situation is absolutely not the result of the profits tax rate and salaries tax rate being too high. The reasoning behind the motion moved by Mr James TIEN has incorrectly assumed that as long as profit-gaining companies and high income earners can retain in their pockets more profits or money by way of tax reduction, then the re-investment and spending by these "first money-makers" will enable the social wealth to filler down which will lead to the economic development and job creation of Hong Kong. I take the United States as an example. In the days of the Reagan Administration, Ronald REAGAN also overlooked the macro-economic shift of the world and believed in the "filtering down" theory. Hence he implemented the tax reduction policy, thinking that the benefits tax reduction brought would "filter down" to the poor and everyone in the community would eventually benefit from it. But the result showed that not only had REAGAN's tax reduction policy sown the evil seed of an ever-rising fiscal deficit, but it had also led to the United States Government's financial stringency. Hence it entered the loan market to grab money, which resulted in the continuous rise in interest rates. With interest rates staying high and investments on the decline, the unemployment rate kept on rising. Furthermore, those who had grown richer because of tax reduction only transferred to other regions (both inside and outside the country) assets and profits they had gained so as to go for a higher return in profits. Between 1949 and 1959 and between 1979 and 1989, the United States economic growth in real terms fell from 3.8% to 2.6%. Between 1973 and 1989, the median household income in real terms failed to grow and, in 1988 United States dollar terms, there was only an increase of US$82. During the same period, the number of jobs in the high-paid manufacturing industries of the United States kept on diminishing, and the number of jobs in the low-paid retail and services sectors was increasing. And, what is more, there was a 59% rise in newly created jobs in the period between 1979 and 1984, the annual salary of which being less than US$7,000. This widened the gap between the rich and the poor. Therefore, the motion moved by Mr James TIEN merely serves to rationalize the unfair social structure and widen the gap between the rich and the poor. The ADPL is of the view that the profits tax rate must not be lowered any further. And in order to have the upper and middle class people bear more responsibility towards the community, the ADPL recommends that a mild progressive scale of tax rates should be adopted instead. For the sake of protecting the middle to low-income people, the Government should increase the personal tax allowances and should not lower the salaries tax rates any further. In the long run, the Government should work towards the goal of improving the quality of the human resources of Hong Kong. With these remarks, I oppose Mr James TIEN's motion and support the amendment motions moved by the Honourable CHAN Kam-lam and Dr LAW Cheung-kwok. THE PRESIDENT'S DEPUTY, DR LEONG CHE-HUNG, took the Chair. MR ANDREW CHENG (in Cantonese): Mr Deputy, before I start to deliver my speech, I would first like to express my admiration towards two Members. The first one is the Honourable CHIM Pui-chung who is a bigwig of the financial services sector. Earlier on Mr CHIM said that during the debate we should focus our attention on those Members who have proposed a motion or an amendment but it seems that Mr CHIM has contradicted himself. He spoke about Dr the Honourable HUANG Chen-ya and he criticized the Democratic Party. Dr HUANG Chen-ya is the Democratic Party's spokesman on economic policy and I am deputy spokesman. Dr HUANG has just returned to this Chamber, and he may add his observations after I have spoken if he wishes to. I thought that since Dr HUANG was not in this Chamber, I, being his deputy, should say something. The Democratic Party has often been criticized for being completely ignorant, devoid of any merit and only looking after the interests of the middle and the lower class. However, when we make concrete proposals or have a specific stance on economic development, for instance, when the Honourable LAW Chi-kwong and Dr HUANG Chen-ya state their positions, we will often be labelled as collaborating with the industrial and the commercial sector. I hope that Mr CHIM will take a closer look at our position before making criticisms. The second Member whom I admire is Dr LAW Cheung-kwok. His courage is worthy of my admiration. He persists in putting forward the proposal of "distributing money" and he circulated his article in this Council again to tell us his position in the hope that we will support him. I wish I could learn to be as persistent as he is because I have stated clearly in my political platform that I will fight to implement the proposal to "give tax concession to first-time home buyers". I wish I could learn to adopt his attitude today and persistently fight for this course on behalf of the Democratic Party. As regards my response to the Honourable James TIEN's motion to reduce the rate of salaries tax, I wish to focus on less controversial issues, namely, the proposal to reduce salaries tax and the proposal to give tax concession to first-time home buyers. Mr Deputy, to the home buyers, the larger portion of their mortgage repayment will go to interests. Therefore, the Democratic Party proposes to introduce "tax concession on mortgage interests for first-time home buyers" (referred to as "tax concession for first-time home buyers" below) in the calculation of salaries tax in the financial year 1996-97 so that the heavy burden of the sandwich class to pay interests will be slightly alleviated. This kind of tax concession is actually in line with the principle of a number of schemes which the Government has now adopted, for example, the Sandwich Class Housing Loan Scheme administered by the Housing Society and the mortgage subsidy scheme offered by the Government. However, it seems that the number of persons who can benefit from schemes offered by the Housing Society and the Government is very limited. The former scheme mainly helps sandwich class families who have no fewer than three members and the scheme is subject to a quota. Although the mortgage subsidy scheme offered by the Government provides subsidy for mortgage interests directly, unfortunately, it aims at helping full-time employees of aided schools, grant schools and health authorities only. Mr Deputy, the Democratic Party wishes to emphasize that tax concession on mortgage interests is offered by many countries including Britain, the United States and Taiwan. I would like to describe this proposal of giving tax concession in detail. The tax concession to be given to first-time home buyers will be half of the total amount of mortgage interests they have paid each year, with the maximum threshold being $100,000 per year, to be given for a period of five years. Applicants should be first-time home buyers who actually occupy the flat. In this regard, the Financial Secretary has discussed with me and asked me whether I have any specific suggestions to verify that applicants are first-time home buyers. I believe Members of this Council will not have the slightest doubt regarding the ingenuity of the Financial Secretary and Mr Anthony AU-YEUNG, the Commissioner of Inland Revenue, who will surely think of ways to ensure that applicants will not give false particulars. One of the feasible measures will be to require applicants to swear or affirm the particulars contained in their applications and make it a criminal offence to declare false particulars in such applications. Besides, we propose to make it a requirement that the annual income of each applicant should not exceed $300,000 and that buyers of Home Ownership Scheme flats, public housing units and those who are receiving government subsidies for mortgage interests will not be eligible to apply for such tax concession. This kind of tax concession will alleviate the burden of first-time home buyers. For instance, for a family earning an annual income of $300,000, if they can obtain $100,000 tax concession for first-time home buyers under the present tax band and threshold, they can save about $20,000 per year which would otherwise be paid as tax. I believe that, to the middle and the lower class, this move would be like "offering charcoal on a snowy day". The Democratic Party supports the Government's policy to stabilize property prices so that the public's wish to own a home can be fulfilled. The tax concession for first-time home buyers which we propose will not only avoid property speculation, but will also take care of the interests of the middle and the lower class because there will be an earnings limit and the concession will only be given to first-time home buyers who buy flats for their own use. Besides, I will reiterate that this tax concession will not be very helpful to those who cannot afford to pay the down payment. Therefore, the introduction of such tax concession will not lead to an upsurge in property prices. In fact, the Legislative Council has had a motion debate on the issue concerned early this year. Therefore, on behalf of the Democratic Party, I urge the Government once again to look into the matter. I will also keep learning to be as persistent as Dr LAW Cheung-kwok and demand for the introduction of tax concession for first-time home buyers. With these remarks, I support Mr James TIEN's motion. Thank you. MR LEE CHEUK-YAN (in Cantonese): Mr Deputy, I would like to respond briefly to the points some Members have made in the debate just now. First, the Honourable James TIEN says that the tax concession he proposes is not to pay out to the rich class but he hopes that the economy will be stimulated and jobs be created through this means. But I feel that such saying is not too proper as it postulates a policy of "robbing the poor to help the rich" in the name of the poor. Recently, we have seen the business community going for tax cuts, wage curbs and "slimming down". It is a worrying tend. Tax-cutting is the issue that we are discussing today; wage curbing is indicated by the General Chamber of Commerce's proposal to set the rate of wage increase no higher than 8%. This is not only happening this year. In the past the Chamber used to make such an appeal every year, calling upon its members to curb wage rises for their staff by setting increases at "inflation minus 2%". The third is "slimming", that is, cutting staff. What is most unfortunate now is that an unprofitable organization would reduce its staff but a profitable organization would also cut its staff. Profitable organizations like the Hong Kong Telecom and San Miguel Brewery as well as the not so well-off Fairwood are all trimming staff. All organizations are "slimming down", cutting costs to increase profit. Therefore, we are worried that even when the taxes are lowered, they may go on "slimming down" because this would be only natural. Man should work in furtherance of his interests and thus it is very natural for investors to go after bigger profits. Therefore, after the taxes are lowered, if employers cut the wages further and "slim down" again, who will be benefited in the end? This is my first major question. The second question is: I feel that the entire tax system is very simple and its purpose is to provide the Government with income to spend. The question is in what way the revenue is to be generated. Concerning the profits tax, the Honourable Mrs Selina CHOW has mentioned just now that small businessmen are also having great difficulties as they are not rich. I totally agree with her point. But I cannot help but ask: Why should we not levy the profits tax based on a progressive scale of rates? Why is it that small businessmen have to pay a 16.5% profits tax while big consortiums like the Hong Kong Bank which has a profit of $20 billion also pay the tax at 16.5%? If things are according to what Mrs Selina CHOW says, we might as well introduce progressive tax bands to lighten the burden of the small businessmen. Many a time Members say they are making pleas on behalf of small and medium-sized businesses. So they might as well really do something for them by proposing to adopt a progressive rate system so that small businessmen would pay 1.5% less tax. Then the tax would be progressively raised so that big consortiums which, as the Honourable CHIM Pui-chung has observed, have made profits could afford to shoulder more social responsibility. I feel that only in the way can the gap between the rich and the poor in the present society be really narrowed. In fact, the tax system is more than just to collect taxes; it is also a mechanism to bridge the gap between the rich and the poor. Thirdly, during the entire debate just now, Members have stressed the spirit of "people in the same boat helping one another". I do not see any problem as far as this spirit is concerned. The real problem is: From the angle of the labour sector, no one can feel the existence of such spirit. In my mind, I see a boat in which everyone is rowing hard. And then, I think of a cartoon in which the Honourable Paul CHENG is riding in the first class cabin of a ship and crying out, "If you do not let me import workers, I will jump onto the de luxe life-boat", meaning that he will relocate his factories to other places. He already told us yesterday that if labour importation was banned, he would leave. Under such circumstance, how can we feel the spirit of people helping one another? I feel that if we are really to help one another, we must show our sincerity and stride forward. Then we can feel this spirit. Another incident is also related to ships. Eight staff of the Hong Kong Ferry are going to sleep outside the company tomorrow in protest against not receiving any compensation when they were laid off after working for the company for over 10 years. The reason relied upon by the company is that they were formerly seamen and, according to labour ordinances, there is no need to give compensation to seamen upon termination of their services. However, these people worked on the ferries of the company instead of ocean liners. Under such circumstance, where is the spirit of helping one another? If the spirit of helping one another is observed, there should be dialogues and discussions. When the employers try to "slim down", do they discuss it with the workers? The reality is that, there is no discussion at all. Once the order is given, the staff are sacked. I sincerely hope that all concerned will give the workers a chance to talk things over. If one feels the need to help one another, one should discuss with one's staff before getting rid of them. One should not just give the order and go straight ahead. I feel that most of the time the employees do understand the difficulties of the employers. For example, I know of some workers whose employers are behind in the payment of their wages for four or five months. I asked them why they would let their employers do so. They said that they wanted to help out and hoped that their employers would be able to make money later. They are really helpful. Even though they have not been paid for four or five months, they still understand. Is this not helping one another indeed? Therefore, I hope that when one talks about helping one another, one should not just pay lip service but should take some concrete action and show one's sincerity. From the angle of the workers, I want to ask, "Have you ever loved me?" If Members can tell me of one matter which shows that employers have the interests of workers at heart, then I can tell the workers that the employers are really willing to walk side by side with them, for better or for worse. I truly hope that I can receive some positive messages and be given real examples in future discussions which can help the "wage earners" of Hong Kong and can allow me to tell them that the employers are really observing the spirit of helping one another. Thank you, Mr Deputy. DR SAMUEL WONG (in Cantonese): Mr Deputy, both the original motion and the two amendments seek to ascertain whether the economic development of Hong Kong can be promoted and whether more employment opportunities can be created. First of all, can the returning of part of the accumulated wealth to the people of Hong Kong on an equitable basis promote the economic development of Hong Kong? I am not an economist and I have no intention to utter a prediction. However, I am definitely sure that it cannot create more employment opportunities. The reason is simple: most people would put the money they share, be it $5,000 or $10,000, into the bank to meet urgent and unpredictable needs in the future. I therefore will certainly not support the amendment moved by Dr the Honourable LAW Cheung-kwok. By the same token, the first part of the Honourable CHAN Kam-lam's amendment aims at urging the Government "to make good use of its fiscal reserve". I totally agree with this view. However, regarding the other part of the amendment, that is, the raising of the personal allowance for salaries tax, it may seem to be worthy of support at first blush. However, by putting only such a minimal amount of money back into people's pockets, can economic development be promoted and employment opportunities be created? I beg to differ. The original motion urges the Government to lower the corporate profits tax immediately, in order that more employment opportunities can be created. I do not think that I need to say further as to the effectiveness of this measure. Some people hold that the public coffers are already "awash with cash", and less tax should be collected in the future so that the economy can be stimulated. Such being the case, I would rather see the Government allocate some more funds to train up our local labour force to cope with the advanced technology and to meet the demand of an ever-advancing society. The families of Hong Kong have an excellent way of teaching and guiding their children: it would be better to educate them so that they are equipped with some skills than to share the family wealth with them because they may be swindled out of that money. However, if they receive good education and good training, they would then be skilled in some kind of work. Similarly, instead of distributing $5,000 to the people, let us help those in need by providing them with skill training that is valued at $10,000 each person. Early last month, I had the opportunity to attend the Annual Conference of the British Labour Party held in Brighton where I was glad to listen to the speech made by the young Labour Party leader. I would like to share with Members some of his thoughts: "technology advances by leaps and bounds and education is for life. Education does not stop when you walk out of the school gates for the last time. We must understand that the more you learn the more you earn. The use of new technology, the mobilization of information power and the enhancement of employment opportunities are the best means to create wealth". Thank you, Mr Deputy. MR FRED LI (in Cantonese): Mr Deputy, the Hong Kong economy is obviously slackening. The Government's projection of GDP growth for 1995 has been readjusted from 5.5% to 5%. The latest figure is 4.8%. This growth rate is not only lower than the figures from 1991 to 1994 but also compares poorly with our neighbouring countries such as Singapore, Taiwan and Korea. Our economy is slackening while the unemployment rate is on the rise. Unemployment and underemployment in June and July were 3.5% and 2.5% respectively, representing a rise of 3% and 2% respectively compared with the period from May to July. Besides, applications for liquidation and bankruptcy have increases tremendously while the number of newly registered companies has also dropped. To our disappointment, the Government is still sticking to the laissez-faire policy which excludes the adoption of fiscal measures to adjust the economy. Faced with an economic downturn and abundant fiscal reserves held by the Government, the Democratic Party is of the opinion that the Government should alleviate the tax burden of the middle and lower classes. In so doing, their living standard can be improved, and on the other hand, their disposable income can be increased. This will in turn stimulate consumption and accelerate the revival of the economy. Our proposal of tax cut is mainly targeted at the middle class, the disabled and the single-parent families. Firstly, the existing tax bands system places a greater burden on the sandwich class. The Democratic Party suggests that for the year 1996-97, the first and second tax bands should be $40,000 respectively and the tax rate for each band should be 2% and 9% respectively. The residual taxable income should then be subject to the current marginal tax rate of 20%. Should the Democratic Party's proposal on the tax bands be accepted and the personal allowances be raised to $91,000, the middle income group and the sandwich class will benefit the most, who will have their tax bill cut by more than $6,000. We propose that the personal allowances be adjusted in line with the median wage and the inflation rate. So we propose that the personal allowances for the year 1996-97 be $91,000, representing a 15% increase compared with the personal allowances of $79,000 in the year 1995-96. This proposal will enable 100 000 lowly-paid taxpayers to be exempted from taxation. Besides, the Government has only adjusted the personal allowances in line with the inflation rate during the past couple of years. Although the personal allowances were not eroded by inflation, people were unable to share the fruit of economic success. They can barely catch up with inflation. So the Democratic Party considers that, having regard to the healthy financial situation and the need for economic development, all items of allowances can be increased in line with the growth rate in per capita income, that is 13.5%. In other words, allowances are adjusted in line with inflation rate and the economic growth rate. So the dependent parent and grandparent allowance should be increased to $31,800 and the allowance for the first and the second child should be $25,000 respectively. In regard to taking care of the vulnerable, we proposed that an allowance be given to individuals who have to take care of disabled dependants. The Government, in the last financial year, took our advice and introduced a new allowance for a disabled dependant. But it is a pity that the allowance is too low, only $11,000, which is far from enough to alleviate the burden of a person who has to take care of disabled dependants. When a family has to take care of a disabled dependant, it will suffer a heavier financial as well as emotional burden. The current allowance for a disabled dependant is not enough to meet the long-term expenditure for a disabled family member. So we proposed that the allowance for a disabled dependant be one half of $91,000 for a single person. So it will be $45,500 for the year 1996-97. Meanwhile, we also suggest that an extra allowance for a working disabled person be introduced in order to encourage the disabled to find employment. The allowance will be one half of that of a single person, that is $45,500. The expenditure of a single-parent family is no less than the expenditure of a double-parent family. It may even be greater. In a double-parent family, there two parents working for a living and the duty of looking after the children is also shared by the two of them. However, a single parent has to look after his/her children and support the family alone. In view of this, it is not justified to grant a lesser allowance to a single-parent family. The current allowance for a single-parent family is only 50% of a double-parent family. It is really unreasonable. We suggest that allowance for a single-parent family be increased from $40,000 to $91,000, in order to bring it in line with the allowance for a double-parent family. The above suggestions on taxation can reflect that the Democratic Party is not going to make the rich better-off. Instead, we want to help the needy. On the contrary, the Hong Kong Association for Democracy and People's Livelihood's proposal of distributing money does not focus on people's needs, because everybody, no matter the rich or the poor, will get $5,000. Although it is called a proposal aimed at returning wealth to the people, it is in fact at variance with the wealth-redistribution principle of the progressive tax system. Mr Deputy, I would like to discuss briefly another main point of this motion debate, that is, the Government's fiscal management principle. The intention of our proposals, whether they be proposals of reducing the corporate profits tax or the salaries tax or money distribution, is to urge the Government not to sit tight on the huge reserves. I hope the Secretary for the Treasury, when making response, will not reiterate the principle of balanced budget and maintaining a robust reserve. We should always maintain a large amount of savings to prepare for a rainy day. But when will the rainy day come? I think the Secretary for the Treasury should provide a reasonable explanation. A deficit budget is not impossible. It did come up last year. However, in the event, we did not have a deficit in that year. Why should we maintain a balanced budget in a situation where the economy is slowing down and a robust reserve is being kept? What is the definition of robust reserve? I remember that in early 1992 when I proposed a motion debate, I urge the Government to set up a broadly-represented tax review committee to look into the Hong Kong taxation system across the board. The review should cover the tax regime, concrete measures to widen the revenue base and the impact of our taxation system on Hong Kong. I think this recommendation is still a sensible one. The taxation system should be reformed in line with social changes. We have not reviewed our taxation system for more than a decade. I therefore call on the Government to undertake this task. With these remarks, I support the Honourable James TIEN's motion. THE PRESIDENT resumed the Chair. Download 0.94 Mb. Share with your friends:
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