Earlier on in my Op-Ed career, I said we ought to hike taxes on the rich in order to provide for the poor, and to help close the ever-widening wealth gap.
Maybe we can still do that, but I’ve changed my mind; it’s not higher taxes that Hong Kong needs, but a wider and more diversified tax base.
We know that space is at a premium in Hong Kong, and we also know that we’re currently witnessing an ever-inflating property bubble.
Why then, despite all this knowledge, do we not act? In Hong Kong, the system is heavily biased against upwards social mobility, with this bias starkly reflected in who, and what, we tax.
Capital and hoarded wealth are left almost untouched by our taxes, which instead seek to siphon away from the economically active vehicles of solid jobs and small business. It’s been top-heavy and unequal since estate duty was discontinued ten years ago, allowing investors – not exactly among the neediest groups in society – to compound their wealth rapidly.
Hong Kong has also failed to take a leaf out of the books of other space-starved territories, such as Singapore. Non-permanent resident individuals in the 852 can snap up properties while remaining immune to taxes.
The government’s approach has so far included two stamp rate increases, in 2013 and 2016, both of which have had a lukewarm effect. This could be because stamp duties increase the costs of doing commerce, prompting owners to sit for longer to maximise their capital gains, and rendering it impotent.
Not to mention, such speculation on static properties does nothing to tangibly grow the economy. It doesn’t help us produce more, nor does it educate and train workers to flourish in high-skilled jobs – the same ability which has proven critical in the construction of our economy’s role as a global financial hub.
The government needs to expand its tax base with methods that are distinct from stamp duties, which have proven ineffective.
Along with taxing businesses and income from jobs, the government needs to levy a tax on the value of properties too, occurring on some fixed basis so as to be a dependable source of revenue (stamp duties, which are only levied when a transaction occurs, are cyclical and inconsistent). This would incentivise investors to diversify into perhaps more risky areas, such as tech, which would help grow the economy.
The revenue from these taxes could be used to help the economy remain competitive and innovative, in addition to making life in Hong Kong more equitable.
What’s not to like?