South China Morning Post
Comment›Insight & Opinion
Philip Yeung wants policies for affordable housing and wider tax base
A government budget is a political document. This is true in any year. After last autumn’s mayhem in the streets, this is even more so now. Preaching the gospel of prudence won’t cut it in these traumatic times.
Hong Kong society is deeply divided along economic fault lines. Accordingly to the International Monetary Fund, extreme inequality is not just immoral; it retards the economy. How else do you explain our robust employment figures against a snail-paced 2 per cent gross domestic product growth?
In his policy address, Chief Executive Leung Chun-ying said he favours attracting talent over capital. Well, I have news for him. Of the recent mainland university graduates that I talked to who are working in Hong Kong, none plans to stay on, for the simple reason that they see no future as permanent renters with only crumbs from the table. Despite a good salary, owning a flat is out of their reach. And who wants to work for the landlord?
Seven years ago, a middle-income friend used to live in a 700 sq ft flat in Wan Chai, paying a monthly rent of HK$10,000. Now, he is squashed into a 300 sq ft cubbyhole that costs HK$22,000. “More for less” – that’s more or less Hong Kong renters’ fate today.
Developer-pampering policies have led to the destruction of the aspirational middle class. The chief executive talks euphorically of giving young people seed money to start their own business. But how long will their venture survive, with greedy landlords breathing down their necks? Talent goes where dreams are achievable, and they are not here.
Financial Secretary John Tsang Chun-wah has let it be known that he abhors unnecessary expenditure. If so, why continue to subsidise owners of multiple properties by gifting them not only deductible mortgage interest payments but outright property tax rebates? There might be a case for aiding owners of primary residences, but not gouging landlords.
The government is keen to uphold our reputation for having a low tax regime to encourage entrepreneurship. But according to economist Arthur Laffer, people go into business not because of low taxes, but because of better opportunities.
Continuing to shave 1 per cent off the profits tax hardly makes us more competitive against Singapore. Entrepreneurs flock here chiefly because of our access to the huge Chinese market. The lost revenue from the cut is money down the drain.
By abruptly terminating its investor immigrant programme, the government is signalling that it is no longer seeking to attract capital to the city. If so, why not reinstate the inheritance tax forthwith? After all, the sole justification for its cancellation was to attract capital inflows. Given our narrow tax base, the widening wealth gap and a market awash with cash, can we still afford to leave unearned wealth totally untaxed?
Life here has been hijacked by unaffordable housing. The property oligarchy has sucked the energy out of a vibrant society, mortgaging our future and reducing disposable income for workers. With our acute land shortage, why does the government ignore the hoarding of unused farmland, now estimated at close to 3,800 hectares?
The mainland has a policy of discouraging land-hogging by “uncompensated repossession” if it remains undeveloped after several years. Maybe we won’t go that far. But why not slap a tax on owners sitting on long-undeveloped land and long-unoccupied flats ? That’s a ready source of revenue with a broadened tax base.
Prudence in times of plenty is not a strategy, it is a lack of heart. Our officials should behave more like traditional benevolent “city fathers” who “see the people”. Don’t tell us that the old laissez-faire policy has been “proven effective”, as our mandarins never tire of saying. Laissez-faire works only when the playing field is level, and ours has been rendered uneven by bad policies.
Leaving us a pile of cash is not much of a legacy for our finance chief, if it comes with the high price of an unfair society. When he redirects his gaze to the 99 per cent from the 1 per cent, that’s when we will proudly say, “In John we trust”.
Philip Yeung is a former speechwriter to the president of Hong Kong University of Science and Technology.