Rather naively, I used to think that the purpose of levying taxes was to enable Governments to meet their fiscal budgets, including measures to improve the standard of living for all concerned in the said country. Whilst not wanting to contribute more tax than I’m obliged to, I think it’s clear that “what the government gives it must first take away”. An obvious example of this is the Hong Kong Government’s HK$6,000 handout to all individuals holding a permanent ID card. However, the Honorable Mr Tsang Chun-wah, John, JP, like many other Financial Secretaries before him, has found that taxation has a secondary value, i.e. social engineering. Time and time again, taxation is used as a means to fix a Government’s problems. Certainly, Mr Tsang appears to believe in this philosophy – clear examples are the three amendments he has introduced to Hong Kong’s direct and indirect tax regime, all of which have been done purely for social purposes as opposed to revenue-collection purposes.
The examples I am referring to are as follows:
• The increase in stamp duty payable on properties acquired after November 20, 2010, and sold within 24 months after acquisition. Despite the fact that Hong Kong’s existing corporate tax legislation provides a mechanism to charge property speculators a profits tax on their profits from the purchase and sale of property, the Government clearly believes that the use of stamp duty is an effective tool to dampen the surge in property prices. I would like to think the Government recognises that this is only a temporary measure and not a reason for ignoring Hong Kong people’s real need: affordable accommodation.
• The Government has increased the first registration tax by 15% on private cars costing more than HK$200,000. The purpose of this increase in indirect tax is to reduce road congestion, particularly as “new infrastructure is becoming expensive and difficult to control in Hong Kong’s unique geographic situation”. What happened to the “user pays” principle, i.e. ERP, or other ideas that have been suggested? Again, is this just an easy way out? Certainly the one thing that will happen is that people will be likely to think twice about buying a new car – great for pollution!
• Finally the duty on cigarettes and other tobacco products has been increased by 41.5%. A recent advertising campaign has advised us that smoking costs the Government substantial sums of money in relation to the provision of medical services to deal with smoking-related illnesses and the loss of productivity through smoking-related sickness. I am a non-smoker who has no wish to inhale second-hand smoke, but I feel that the use of indirect tax to make smoking more expensive is simply delaying a decision the Government needs to make, i.e., whether to further restrict the smoking of tobacco. If the decision is to permit smoking, albeit in restricted locations, why should it become a luxury that only the more affluent can afford?
You may consider these issues to be insignificant, but to my mind, the use of taxation for social engineering is a trend that should be avoided. I would encourage the Government to address the true causes of the problems rather than using taxation as a quick fix or band-aid.
