{"id":2696,"date":"2023-07-26T08:52:04","date_gmt":"2023-07-26T08:52:04","guid":{"rendered":"https:\/\/bricksandmortarmgt.com\/?p=2696"},"modified":"2024-10-25T02:56:32","modified_gmt":"2024-10-25T02:56:32","slug":"dont-fall-for-the-fallacy-hk-needs-a-narrower-tax-base","status":"publish","type":"post","link":"https:\/\/bricksandmortarmgt.com\/zh_hk\/2023\/07\/dont-fall-for-the-fallacy-hk-needs-a-narrower-tax-base\/","title":{"rendered":"Don\u2019t fall for the fallacy \u2013 HK needs a NARROWER tax base 20230726"},"content":{"rendered":"<div data-elementor-type=\"wp-post\" data-elementor-id=\"2696\" class=\"elementor elementor-2696\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-43462ed elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"43462ed\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-039b069\" data-id=\"039b069\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-0912906 elementor-widget elementor-widget-text-editor\" data-id=\"0912906\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>In view of recent reports of HK fiscal deficits, the pundits are yet again out in force, staging the tired chorus (including the organisation never engaged in any profitable enterprise, the <a href=\"https:\/\/www.imf.org\/en\/News\/Articles\/2023\/05\/04\/mcs050423-hksar-staff-concluding-statement-of-the-2023-article-iv-mission\">IMF<\/a>) of how HK\u2019s tax take is too volatile and we should reform to \u2018broaden the tax base\u2019 and so on and so forth, to the point that even the HKSAR govt has been hypnotised into starting its own initiative looking into this most unsuitable direction to take for an open economy which survives on being a \u2018super connector\u2019 (this is the HKSAR\u2019s own <a href=\"https:\/\/www.info.gov.hk\/gia\/general\/201705\/25\/P2017052500250.htm?fontSize=1\">term<\/a>!) of people, goods, capital, and ideas:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-29bed4d elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"29bed4d\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-fb1d07b\" data-id=\"fb1d07b\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-25c0953 elementor-widget elementor-widget-text-editor\" data-id=\"25c0953\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Figure 1: resist the temptation Chief Executive Lee, stay narrow and stay competitive<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-0563a04 elementor-widget elementor-widget-image\" data-id=\"0563a04\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"769\" height=\"521\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P1.jpg\" class=\"attachment-large size-large wp-image-2698\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P1.jpg 769w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P1-300x203.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P1-18x12.jpg 18w\" sizes=\"(max-width: 769px) 100vw, 769px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-1ea0744 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"1ea0744\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-ebd5b70\" data-id=\"ebd5b70\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-d34d2bd elementor-widget elementor-widget-text-editor\" data-id=\"d34d2bd\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>To illustrate the point more explicitly, we have compiled the total number of levies in the key subcategories of taxation for a number of jurisdictions (HK vs Singapore and Switzerland as small open regions, and Australia and UK as traditional OECD large economies). What is clear from the exercise is that the fewer taxes levied in an economy, the higher the economic growth, and vice versa:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-bf7e178 elementor-widget elementor-widget-image\" data-id=\"bf7e178\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1024\" height=\"419\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/Screenshot-2023-07-26-155431-1024x419.png\" class=\"attachment-large size-large wp-image-2699\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/Screenshot-2023-07-26-155431-1024x419.png 1024w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/Screenshot-2023-07-26-155431-300x123.png 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/Screenshot-2023-07-26-155431-768x314.png 768w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/Screenshot-2023-07-26-155431-18x7.png 18w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/Screenshot-2023-07-26-155431.png 1273w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-808dccd elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"808dccd\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-109ff68\" data-id=\"109ff68\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-0129110 elementor-widget elementor-widget-text-editor\" data-id=\"0129110\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>We further collected all the government revenue information of the same jurisdictions and put them in the same general groupings but shown in proportion of total revenues.<\/p><p>It is worth quickly explaining what the tax groupings are:<\/p><ol><li>direct taxation on people\u2019s economic activities \u2013 ie tax on income, profits &amp; capital gains;<\/li><li>indirect taxes, in the following activity groupings:<ul><li>taxes levied on <u>labour market activities<\/u> (eg payroll taxes, royalties);<\/li><li>taxes on <u>property transactions<\/u> (mostly stamp duty and rates);<\/li><li>taxes on <u>consumption<\/u> (ie GST, VAT, plus vehicle and insurance taxes);<\/li><li><u>traditional social engineering<\/u> levies (the so called sin taxes on gambling, alcohol, tobacco);<\/li><li><u>new social engineering<\/u> levies (all the woke and communistic charges that became so popular in recent years, such as climate change tax, carbon credits); and<\/li><li>border related <u>tariffs\/duties<\/u> (besides traditional tariffs we also include airport taxes \u2013 essentially a charge on foreign people crossing borders).<\/li><\/ul><\/li><\/ol><p>We argue below how careful design of tax regimes can serve as important factors in promoting the competitiveness and economic vibrancy of an economy, and how the proportions need to be adjusted as policy priorities that all governments should pay attention to.<\/p><p><strong>Open free economies tax less on income<\/strong><\/p><p>What jumps out from the charts below are that Hong Kong and Singapore rely on <u>significant land sale revenues<\/u> (dark red in <em>Charts 1<\/em> and <em>2<\/em>) as their fiscal income, which helps when both are amongst the most expensive property markets in the world!<\/p><p>Further, HK\u2019s <u>simple and low tax regime<\/u> as an advantage is also clear \u2013 4 of the tax categories had nil, or near zero incomes, making it low friction for commerce, and less cumbersome administration of the same taxes as would be the case in other countries. Singapore is less simple but still has one near-zero intake category (thankfully the \u2018new social engineering\u2019 group).<\/p><p>Finally, both city economies have <u>much lower direct tax<\/u> takes \u2013 with HK at 49% and Singapore an even lower 42% (<em>dark blue<\/em> area) \u2013 thus rewarding work and enterprise more than their bigger competitors:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-51ebaf7 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"51ebaf7\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-e5ebc8d\" data-id=\"e5ebc8d\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-ecb640d elementor-widget elementor-widget-text-editor\" data-id=\"ecb640d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Chart 1: HK govt income \u2013 low on direct taxation<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-c522b34 elementor-widget elementor-widget-image\" data-id=\"c522b34\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"448\" height=\"281\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P2.jpg\" class=\"attachment-large size-large wp-image-2700\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P2.jpg 448w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P2-300x188.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P2-18x12.jpg 18w\" sizes=\"(max-width: 448px) 100vw, 448px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-efaea3d\" data-id=\"efaea3d\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-c415f2e elementor-widget elementor-widget-text-editor\" data-id=\"c415f2e\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Chart 2: Singapore GST helps reduce other tax burden<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-3e31f41 elementor-widget elementor-widget-image\" data-id=\"3e31f41\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"426\" height=\"291\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P3.jpg\" class=\"attachment-large size-large wp-image-2701\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P3.jpg 426w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P3-300x205.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P3-18x12.jpg 18w\" sizes=\"(max-width: 426px) 100vw, 426px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-3466b84 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"3466b84\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5f73924\" data-id=\"5f73924\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-c524cb2 elementor-widget elementor-widget-text-editor\" data-id=\"c524cb2\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>In the other extreme, UK\u2019s takes more out of income (66% of tax revenue is from income\/profit taxes) than all the jurisdictions in our study; of what is left in the tax payer\u2019s pocket, the UK takes a larger slice through consumption taxes (19.8% of tax take vs Australia\u2019s 11.1%, <em>light green<\/em> in <em>Chart 4<\/em>) than the other countries. Besides higher tax on income and consumption, the UK also has the most number of headings under which it taxes its people, making it even more unpalatable for the average wage earning tax payer:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-bde13a7 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"bde13a7\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-27b36eb\" data-id=\"27b36eb\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-82d9c22 elementor-widget elementor-widget-text-editor\" data-id=\"82d9c22\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Chart 3: Percentage of Tax Revenue Breakdown in Australia <\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ea146c2 elementor-widget elementor-widget-image\" data-id=\"ea146c2\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"448\" height=\"288\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P4.jpg\" class=\"attachment-large size-large wp-image-2702\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P4.jpg 448w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P4-300x193.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P4-18x12.jpg 18w\" sizes=\"(max-width: 448px) 100vw, 448px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-7027539\" data-id=\"7027539\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-2aeed08 elementor-widget elementor-widget-text-editor\" data-id=\"2aeed08\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Chart 4: Percentage of Tax Revenue Breakdown in UK <\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-161be9a elementor-widget elementor-widget-image\" data-id=\"161be9a\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"465\" height=\"300\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P5.jpg\" class=\"attachment-large size-large wp-image-2703\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P5.jpg 465w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P5-300x194.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P5-18x12.jpg 18w\" sizes=\"(max-width: 465px) 100vw, 465px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-f255ee8 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"f255ee8\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-0abc6c4\" data-id=\"0abc6c4\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-ec30484 elementor-widget elementor-widget-text-editor\" data-id=\"ec30484\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Isn\u2019t it ironic therefore that the proponents of \u2018broader tax base\u2019 are heeding the preachings coming from largely high tax jurisdictions?<\/p><p><strong>Can HK cancel income\/profit tax and levy sales tax instead?<\/strong><\/p><p>The USA did not have income tax until the 16<sup>th<\/sup> Amendment was passed in 1913, before that Article 1, Section 9, Clause 4 of the US constitution <strong>forbade direct taxation explicitly<\/strong>. The fact that this provision was inserted in Article 1 of the constitution is significant evidence that the founding fathers did not intend the state to infringe on the freedom of the people to generate and keep their own wealth.<\/p><p>HK\u2019s situation is perhaps also conducive to a move away from income taxes \u2013 by virtual of its vast trade and re-export flows, immense tariff or sales tax intake could be achieved without burdening either its wage earning population, or profit making enterprises.<\/p><p>The other advantage of a move from income tax to sales tax is the more stable income stream compared to volatile sources such as land sales and even income\/profits taxes.<\/p><p>Theoretically speaking, private consumption expenditure, when taxed at a mere 10% tax rate on 80% of total consumption can already generate HK$188billion of revenue (<em>Table 2<\/em>):<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-538cf97 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"538cf97\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-7905838\" data-id=\"7905838\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-0eae3bf elementor-widget elementor-widget-text-editor\" data-id=\"0eae3bf\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Table 2: Theoretical sales tax collectable for various tax rate scenarios<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-f70a450 elementor-widget elementor-widget-image\" data-id=\"f70a450\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"294\" height=\"124\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P6.jpg\" class=\"attachment-large size-large wp-image-2704\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P6.jpg 294w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P6-18x8.jpg 18w\" sizes=\"(max-width: 294px) 100vw, 294px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-top-column elementor-element elementor-element-1b5a61b\" data-id=\"1b5a61b\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-c0b6b58 elementor-widget elementor-widget-text-editor\" data-id=\"c0b6b58\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Table 3: Sales tax at 14% on 80% of consumption more than covers all income tax and corporation tax takes<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-1f7e953 elementor-widget elementor-widget-image\" data-id=\"1f7e953\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"289\" height=\"122\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P7.jpg\" class=\"attachment-large size-large wp-image-2705\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P7.jpg 289w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P7-18x8.jpg 18w\" sizes=\"(max-width: 289px) 100vw, 289px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-4d2b666 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"4d2b666\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-aad6288\" data-id=\"aad6288\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-c9c26c1 elementor-widget elementor-widget-text-editor\" data-id=\"c9c26c1\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>In other words, Hong Kong can collect enough sales tax with a rate of 13.5% on 80% of private consumption expenditure to cover all the income and corporation taxes foregone if we were to make such a transition tomorrow.<\/p><p><strong>Revisiting study: less income tax leak = more economic growth<\/strong><\/p><p>In our earlier research looking at tax composition amongst US states, it was clear that more sales tax than income tax allows people keep more of their wealth, and is better for ecnomic growth, and similarly giving individuals equal or better treatment than company also engenders prosperity (the study can be seen here \u2013 English: <a href=\"https:\/\/bricksandmortarmgt.com\/2022\/10\/which-us-states-are-tax-friendly-and-cheap\/\">web<\/a>, <a href=\"https:\/\/yulun2012.blogspot.com\/2022\/09\/which-us-states-are-tax-friendly-and.html\">blog<\/a>, <a href=\"https:\/\/www.linkedin.com\/pulse\/which-us-states-tax-friendly-cheap-eric-wong?trk=pulse-article_more-articles_related-content-card\">linkedin<\/a>, <a href=\"https:\/\/www.facebook.com\/100063775942716\/posts\/pfbid06FfHbyD9zrNAA6YoGefFrCFAAMvj7grcUWPrJmhyv1vZABkE8Uo3ySbbLa5asmWMl\/?mibextid=cr9u03\">facebook<\/a>; Chinese: <a href=\"https:\/\/bricksandmortarmgt.com\/2022\/10\/%e7%be%8e%e5%9c%8b%e5%b7%9e%e4%bb%bd%e8%8a%b1%e5%a4%9a%e4%ba%82-%e4%bd%8e%e7%a8%85%e9%ab%98%e5%80%bc%e6%ad%a4%e4%b8%ad%e5%b0%8b\/\">web<\/a>, <a href=\"https:\/\/yulun2012.blogspot.com\/2022\/10\/blog-post_13.html\">blog<\/a>, <a href=\"https:\/\/cn.linkedin.com\/pulse\/%E7%BE%8E%E5%9C%8B%E5%B7%9E%E4%BB%BD%E8%8A%B1%E5%A4%9A%E4%BA%82-%E4%BD%8E%E7%A8%85%E9%AB%98%E5%80%BC%E6%AD%A4%E4%B8%AD%E5%B0%8B-eric-wong?trk=pulse-article_more-articles_related-content-card\">linkedin<\/a>, <a href=\"https:\/\/www.facebook.com\/100063775942716\/posts\/pfbid02SS4j5ySmk3EnXo41MuhxeBe2vCMmd7ib6Ge24idPMd5GWVFvxiGSxcXfwjzPJedvl\/?mibextid=cr9u03\">facebook<\/a>).<\/p><p>Adopting the same analysis in the prior study, we now add our five candidate tax regimes to the study, by plotting them on the same two measurements:<\/p><ol><li><strong>sales tax less income tax<\/strong> (x axis) \u2013 higher value means consumption rather than savings are being taxed, thus encouraging investment for longer term;<\/li><li><strong>income tax less corporation tax<\/strong> (y axix) \u2013 a low reading indicates either there is a booming corporate sector or individuals get to keep more of their salaries.<\/li><\/ol><p>Below chart shows that with current tax compositions, HK and Singapore (near the red states) are better positioned than Switzerland\/Australia\/UK which are situated in the more oppressive quadrant (amongst the purple states) of the original distribution:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-f6218d2 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"f6218d2\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-bd708f0\" data-id=\"bd708f0\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-4cd7f7e elementor-widget elementor-widget-text-editor\" data-id=\"4cd7f7e\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Chart 5: lower income tax for HK\/SGP suggests better economic prospects<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7c7e4bf elementor-widget elementor-widget-image\" data-id=\"7c7e4bf\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"382\" height=\"226\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P8.jpg\" class=\"attachment-large size-large wp-image-2706\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P8.jpg 382w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P8-300x177.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P8-18x12.jpg 18w\" sizes=\"(max-width: 382px) 100vw, 382px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-e673a9f elementor-widget elementor-widget-text-editor\" data-id=\"e673a9f\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>Then if we replace all HK income\/corporation taxes with sales taxes as outlined above, HK\u2019s position improves massively \u2013 becoming the jurisdiction furthest right in the study universe (right hand <em>red diamond, Chart 6<\/em>) and leaving Singapore well and truly in the dust:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-9a35ec2 elementor-widget elementor-widget-text-editor\" data-id=\"9a35ec2\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><em>Chart 6: by replacing income\/corporation tax with sales tax, HK beats all US states on tax attractiveness<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-bccb7a9 elementor-widget elementor-widget-image\" data-id=\"bccb7a9\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"388\" height=\"239\" src=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P9.jpg\" class=\"attachment-1536x1536 size-1536x1536 wp-image-2707\" alt=\"\" srcset=\"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P9.jpg 388w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P9-300x185.jpg 300w, https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P9-18x12.jpg 18w\" sizes=\"(max-width: 388px) 100vw, 388px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-1a98e22 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"1a98e22\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-8b64a6f\" data-id=\"8b64a6f\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-9dde1ec elementor-widget elementor-widget-text-editor\" data-id=\"9dde1ec\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p>The above scenario places Hong Kong very much near (if not at) the top of the (Sales Tax \u2013 Income Tax) axis amongst the 130+ countries in the world collecting sales taxes. By abolishing the income and corporation taxes, Hong Kong\u2019s global competitiveness and attractiveness for almost all global companies and high income talents, not to mention vast amounts of tax refugees in developed countries where simply being rich is a sin, and having income anywhere outside the country\u2019s borders is a reason to be taxed.<\/p><p>Given the significant benefit of not just economic attractiveness, but also a massive reduction in administrative burdens that the whole tax collection bureaucracy brings with the income\/corporation tax regimes, improvements in citizen\u2019s privacy standards (no need to declare what, how, and when you earn your incomes), Hong Kong can truly become a beacon of freedom and commerce. Chief Executive Lee and Financial Secretary Chan should ignore the cacophony of calls from vested interest groups calling for \u2018boradening tax base\u2019 including accountants, regulators, and academics, whose livelihood only improves if we have complex and oppressive tax systems, for it is they who get work \/ compensations when we go down that road. HK deserves better.<\/p><p><em>The author would like to thank Tia Yik Ethan from The University of Hong Kong majoring in Finance for assisting in data collection, analysis, and drafting of this article.<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"<p>In view of recent reports of HK fiscal deficits, the pundits are yet again out in force, staging the tired chorus (including the organisation never engaged in any profitable enterprise, the IMF)&#8230;<\/p>","protected":false},"author":8,"featured_media":2711,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","content-type":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"disabled","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","footnotes":""},"categories":[1033,9,962],"tags":[1394,1257,948,1259,1256,1226,1390,1191,1214,944,1255,1391,1258,1395,1260,1392,1396,1393,951,1263],"class_list":["post-2696","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic","category-hong-kong","category-us","tag-broaden-tax-base","tag-corporate-income-tax","tag-england","tag-fiscal-policy","tag-government-tax-intake","tag-hk","tag-hksar","tag-hksar-government","tag-home-price","tag-housing","tag-individual-income-tax","tag-individual-tax","tag-property-tax","tag-reform-vested-interest","tag-sales-tax","tag-sales-tax-representation","tag-sgp","tag-swiss","tag-tax","tag-us-tax"],"jetpack_featured_media_url":"https:\/\/bricksandmortarmgt.com\/wp-content\/uploads\/2023\/07\/P1-1.jpg","_links":{"self":[{"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/posts\/2696","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/comments?post=2696"}],"version-history":[{"count":13,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/posts\/2696\/revisions"}],"predecessor-version":[{"id":3628,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/posts\/2696\/revisions\/3628"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/media\/2711"}],"wp:attachment":[{"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/media?parent=2696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/categories?post=2696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bricksandmortarmgt.com\/zh_hk\/wp-json\/wp\/v2\/tags?post=2696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}