SCMP Tuesday, January 9, 2001


Easing of tax burden for middle class urged

PAMELA LEUNG

Changes should be made to the tax system to ease the burden of the middle class, business representatives said yesterday.
The level at which workers start paying tax should stay unchanged instead of being raised each year, while those already in the tax net should pay less, said Henry Tang Ying-yen, chairman of the Federation of Hong Kong Industries.
This would increase the number of people paying tax, but lessen the amount most of them paid, said Mr Tang, an Executive Councillor and Liberal Party member.
"Not every Hong Kong person can enjoy the fruits of the city's economic growth and recovery," he said. "The middle class, which is making the heaviest tax contribution, has been suffering since the Asian economic crisis. They have a higher risk of being fired and a small salary increase . . . and they may also be suffering from deficit asset value," he said referring to the fact that many have homes worth less than they originally paid for them.
"At present, of the 3.2 million working population, only 1.2 million are paying salaries tax. Only 10,000 people are paying the standard 15 per cent salary tax rate and they contribute 43 per cent of total salaries tax."
Mr Tang said that easing the financial burden of the middle-class would help bolster consumption and the retail market.
Keeping allowances constant could add 500,000 workers to the tax net. Even if they paid only several hundred dollars tax each, the Government's revenue would be significant. When the Government raised the salary tax allowance in 1998, tax revenue was reduced by $8 billion, Mr Tang said.
The federation also hoped the Government would increase tax allowances for companies investing in hi-tech research.
He said if such allowances were not given in Hong Kong some firms might move research and development operations to the mainland - where a high tax allowance is granted. "If [the Government] wants private firms to have research, tax incentives are needed."
Mr Tang said the federation would pass its opinions on tax issues to the Financial Secretary.
The federation forecast the SAR would have a steady, economic growth of five per cent in 2000. Continued growth would be subject to the soft-landing of the United States economy, because local growth was export driven, Mr Tang said.
China's entry to the World Trade Organisation, expected in the first half of this year, would also bolster Hong Kong's economy, he said. This would bring "opportunities as well as risks".