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| March 2000 Sales tax should be delayed awhile By Crystal Tang RELATED ARTICLE: Article from the same section: Although Financial Secretary Sir Donald Tsang Yam Kuen has claimed that the government has not yet made any decision about the implementation of a sales tax, people are debating whether it is good to expand the tax base in such a way. “It is dangerous if our economy depends on direct taxes only,” said Dr. Patrick Leung, professor in the School of Economics and Finance at Hong Kong University. He said if there was an economic downturn, direct taxes received would decrease a lot and deficit would appear in the government budget. “However, I still don’t think it is a good time to introduce the sales tax,” said Dr. Leung. “The Mandatory Provident Fund is going to be imposed in late 2000. Its impact is as same as the sales tax. So, the burden of people has already increased,” said Dr. Leung. Dr. Francis Lui Ting Ming, professor in the Department of Economics at Hong Kong University of Science and Technology, agreed. Said he: “From the point of fairness, a sales tax is good since both the rich and the poor have to pay the same amount. “The rich will pay more sales tax as their expenditures are greater than the poor. “However, in the eyes of an economist, a sales tax will harm the economy, especially when the economy hasn’t fully recovered from the Asian economic turmoil.” Dr. Lui said that a sales tax would not only hinder the economic recovery, but also deter consumption if it is going to be imposed now. Said he: “I think the reason for the suggestion of imposing a sales tax is because the government expenditure keeps increasing these years. “As stated in the Basic Law, people should enjoy a low tax rate system, so the government can’t increase the tax rate at all. “The growth of government expenditure increased more than the gross domestic product these years. It made up about 21 percent of the gross domestic product. “Since there is no free lunch in this world, the government has to raise its revenue later as more money is being spent.” Mr. Lee Kang Bor, the president of The Taxation Institute of Hong Kong, said he did not know whether he would agree with the implementation of a sales tax or not, as he has studied neither detailed surveys nor research about the implementation of a sales tax. However, he said it is still a very complicated issue and it has to be considered very carefully. |
A sales tax may defer consumption, say
experts.(Crystal Tang)
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