SCMP Saturday, December 23, 2000

Donald Tsang removed from the line of fire


Perhaps Financial Secretary Donald Tsang Yam-kuen no longer needs to worry too much about his predictions of a $10 billion budget deficit - because his Executive Council colleague, Henry Tang Ying-yen, may soon bring him a small windfall, as a by-product of the upcoming overhaul of Hong Kong's problem-plagued construction industry.
This Government has had to contend with repeated piling scandals over poor building standards at its Home Ownership Scheme developments. In an attempt to restore public confidence in the quality of new buildings, Tung Chee-hwa this summer asked Mr Tang to head a high-powered committee to review Hong Kong's construction industry.
Mr Tang, who wants to raise local construction standards to a world-class level, has pointed out that a "cultural change" is needed within the industry. It is understood the committee will next month recommend the establishment of a new body to oversee the industry. A registration system will also be set up, with construction workers required to take a skills test.
But Mr Tang has warned this proposal may not be welcomed by all affected parties - as it could have negative consequences for developers, contractors and construction workers.
The main worry for such workers and contractors is that they will have to start paying salaries tax. It is estimated that there are up to 200,000 workers in the field, with about 80,000 working on construction sites and the rest involved in decoration work. But most are self-employed and paid in cash, making it easier for them to avoid paying tax on their income.
But if all such workers have to be registered under the new system proposed by the committee, then the Inland Revenue Department will find it much easier to locate and identify them. The current market salary for a construction worker is $850 a day, and assuming they work for 20 days a month, their average annual income is about $200,000.
While this is too low for those with families to be liable for tax, many are single. If only 25,000 of Hong Kong's estimated 200,000 construction workers are unmarried - and assuming that none of these currently pay tax - that amounts to a $200 million annual windfall for the treasury. And that is before the Government begins to reap the benefits of profit tax payments by the hundreds of small sub-contractors who are not now registered as companies, but would have to be under the proposed new system.
That is one reason why Mr Tang has predicted his reform package, to be released within the next few weeks, will prove highly controversial. The construction industry, especially unions and small sub-contractors, will certainly object, even though they are unlikely to spell out the real reasons for their opposition. Instead, they are likely to come up with excuses, such as suggesting that the new skills test will lead to a loss of jobs.
It is not unusual for social reforms to fail not because they don't benefit society but because those affected are required to pay more. Bosses and low-income workers dislike the Mandatory Provident Fund because of the five per cent contribution from their salary. Now the public is complaining about health reforms that would take a further one or two per cent from their wages.
While the debate over how to reform the construction industry may seem to be about building standards, cost-effectiveness and environmental awareness, the truth is that it is the financial interests of those involved that is at stake.
Quinton Chan ( ) is a staff writer for the Post's editorial pages. Danny Gittings is on holiday.