Because of Hong Kong’s wide rich-poor gap, “widening the tax base” by whatever means – which usually would make the low- and middle-income classes pay more – would produce little revenue (after subsidies and exemptions for the poor) and be socially destabilizing. 

In fact, much public revenue is derived from non-tax sources such as land-related revenues and stamp duty from stock transactions.  These are generated by economic production, to which people from all strata of the community contributed. 

Volatility of such revenues should be reduced by counter-cyclical and long-term land supply policies (see relevant parts in our paper on housing).  Parameters might include GDP growth rates and the ratio between the price of a flat and economic output per person.

Also, in “good years” as measured by such yardsticks, provisions should be set aside in the Budget for  “lean years”.  Provisions should also be set aside for long-term policy objectives such as coping with population aging, improving the environment, and enhancing competitiveness.

On the expenditure side, to maximize efficiency, market forces should be given free rein under rationalized mechanisms put in place.  Administrative measures and schemes are bound to result in mismatch between resources and needs, i.e. waste, and even more deleterious policy consequences.  This is most obvious in housing assistance (see our Housing webpage).  Freeing up that sector to the market would produce substantial savings and greatly alleviate future fiscal burden from population aging.

For details, click here for the paper Restructuring housing assistance: benefits for housing, Budget and economy.

Competitiveness [2003] | Elections [2014] | Harbourfront [2008] | Healthcare [2008]
Housing [2011]| Public finance [2008] | Social security [2014]