Our society has continued to be polarized over various issues and the wealth gap is widening at an alarming rate. Hong Kong, indeed, is on the brink of widespread social unrest.
To make things worse, China has been plagued by economic downturn in recent years, compounded by the fact that Britain’s exit from the European Union could have far-reaching and negative implications for the global economy.
As the world market is becoming increasingly volatile and uncertain, the economic outlook of Hong Kong is anything but bright in the short to medium term.
Mindful of the gloomy economic prospects of our city, Li Ka-shing, the richest business magnate in Hong Kong, said during a recent interview he gave to Bloomberg that our economy could now be facing its toughest times in 20 years.
That said, he suggested the government raise corporate tax by 1 to 2 percent, and use the extra revenues to improve our health care and education in order to narrow the wealth gap.
Li stressed that the most important thing is to bring hope to the general public, particular young people, so as to allay their grievances.
Li hit the nail on the head, and we should give him credit for his suggestion, as he was calling upon big businesses in Hong Kong, including his own, to bear some social responsibility.
However, just shortly after Li’s interview had been aired, James Tien Pei-chun, lawmaker and honorable chairman of the Liberal Party, lashed out at Li and said the reason why he was igniting another controversy and calling on the government to raise corporate tax is because he wanted to divert Beijing’s attention from his ongoing massive withdrawal of investments from China.
James Tien’s cheap shot against Li is simply mind-boggling, and once again illustrates the true colors of the Liberal Party: they are nothing but a bunch of selfish and short-sighted politicians who are only concerned about protecting the vested interests they represent.
As we all know, for decades Hong Kong is renowned for its low and simple tax regime, with its personal income tax rate standing at 15 percent and corporate tax rate 16.5 percent – the latter is far below the international average of 23.6 percent and almost the lowest globally.
According to the figures provided by the Inland Revenue Department, last year the government received HK$140.2 billion in corporate tax.
By raising it 2 percent as Li Ka-shing proposed, the government can receive roughly an extra HK$17 billion every year.
(Editor’s note: To put that in perspective, HK$17 billion is enough for building around 80 new primary and secondary schools, or six to seven new public hospitals.)
Currently corporate tax accounts for 48 percent of our government’s tax revenues, and around 70 percent of our corporate tax revenues come from big businesses.
In other words, even if the government did raise corporate tax by 2 percent, most small businesses in Hong Kong just wouldn’t feel the pinch at all.
Some academics have argued that having a low tax regime is our unique strength, and therefore raising corporate tax could scare off foreign investors.
To me, such ignorant argument just can’t stand up to the most basic scrutiny.
What foreign investors are truly concerned about is the growth prospects and overall business environment of the city they want to invest in, as well as whether or not it is governed by the rule of law.
As long as Hong Kong can continue to maintain its unique advantages such as judicial independence and social stability, a difference of 1 to 2 percent in corporate tax rate is just peanuts for big foreign investors.
In fact, the Liberal Party has a track record of acting against public interest, opposing such measures as the introduction of minimum wages, paternity leave and universal retirement schemes.
The Liberal Party has pledged over and over again to promote social harmony, but it is opposed to Li Ka-shing’s suggestion which is aimed exactly at that, and which has already gained the support of some big businesses.
How could we continue to maintain a good business environment in Hong Kong, the very thing that the Liberal Party has vowed to promote since the day it was founded, if our wealth gap is widening and social discontent is mounting rapidly?
This article appeared in the Hong Kong Economic Journal on July 8.
Translation by Alan Lee
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CG
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