Tax hike not on cards despite subsidy rise

(The Standard 4 Feb 2014) It is "almost impossible" for Chief Executive Leung Chun-ying to increase taxes in the remaining three years of his term, according to the Executive Council convener.

Lam Woon-kwong also said Hong Kong will not become a welfare state despite Leung's poverty- alleviation measures.

In an interview with The Standard, Lam said Hong Kong's tax base is narrow because of its heavy reliance on a limited range of taxes, such as profits tax and property-related tax.

And reacting to suggestions that new broad- based taxes should be introduced, Lam said he could not see that happening in the next three years.

"It is simply a political act when we talk about increasing taxes," said Lam.

"Hong Kong still has massive fiscal reserves. We have no basis to tell people about increasing taxes and it is almost impossible for the government to increase taxes based on political consideration."

Last month, Leung used his second policy address to announce a spate of initiatives to help the poor, including a HK$3 billion annual subsidy for low-income working families, benefiting some 710,000 people.

Those initiatives, plus others, will increase the government's recurrent spending by about HK$20 billion each year.

"I totally disagree that Hong Kong will head to a state of welfare as the territory traditionally sticks to the belief of small government in managing public finances," Lam said.

At present, the government's recurrent spending has only reached less than 20 percent of local gross domestic product a year, Lam said.

That is relatively low compared with Organization for Economic Cooperation and Development member countries, some of which use 40 percent of their GDP for public spending.

Lam said Financial Secretary John Tsang Chun- wah was merely fulfilling his responsibility when he earlier said that recurrent spending, once implemented, could be difficult to cut.

"As Leung has honored his election pledge to help the poor and the underprivileged in the latest policy address, I don't think that it will bring Hong Kong to a fiscal cliff," Lam said.

Lam, the former Equal Opportunities Commission chairman and civil service chief, said though Leung's administration had encountered challenges in governance in the beginning, he has never thought of resigning as Exco convener.

"Our role is to give advice on government policies and the government has to make its decisions on policies based on its own considerations," Lam said.

Asked if he has thought of running in the chief executive election in 2017, Lam immediately smiled.

"I absolutely have no such thought," he said. "I have no such ambition."

 

Eddie Luk