Medicine that is too bitter to swallow
Good medicine often comes as a bitter pill, the chief executive tells us. By proposing a goods and services tax, the government is offering us a dose of something unpleasant - which will do us all a power of good in the long run.
I am not a doctor and neither is Donald Tsang Yam-kuen. One thing I don't need medical training to know, however, is that it's not only good medicine that leaves a nasty taste: most bad medicine does, too.
Ten weeks into the GST consultation, the government now faces a rising tide of resistance to the idea: our polls show opposition has risen from 59 to 73 per cent. And yet Mr Tsang responds by suggesting the majority of the people want the administration to bury its head in the sand over our financial plight.
In reality, the voices speaking against the GST are logical and reasoned. It is the voices of Mr Tsang and the financial chief that seem immune to reason - and that is disturbing.
Quite simply, the people of Hong Kong oppose a GST because they consider it economically damaging and unnecessary. Both Mr Tsang and the financial secretary have failed to convince us otherwise. Moreover, a survey by InvestHK has concluded that international companies may be less inclined to invest here if we cast off our simple system of low taxes.
The business leaders and ordinary people consulted by the government have studied the proposal closely and thought it through carefully. They have also listened to the chief executive and the financial secretary's arguments. And they have concluded that the case for the tax simply does not add up.
The key argument for introducing it is that Hong Kong's tax base is too narrow, and needs to be broadened to avoid major fiscal deficits in future.
We are told that, while we have HK$1.1 trillion in assets in the government's Exchange Fund, we cannot rely on that to see us through another economic slump or to pay the costs of our ageing population. However, when we look back to our economy during the boom time before the 1997 handover, those assets were around HK$700 billion. So why are we fretting over the possibility of another financial crisis when, despite the traumas of the past nine years, those assets have grown 57 per cent?
We are told that salaries tax accounts for nearly 33 per cent of tax revenues. And yet, of the HK$247 billion in government revenue for the financial year to March, HK$42 billion - just 17 per cent - came from salaries tax, personal assessment and property tax.
We are told that our tax income is volatile. And yet, in the most recent financial year, the government received more than HK$40 billion from land premiums and other capital revenues - a figure that has been relatively stable over most of the past nine years.
Is it really such a bad idea, in any case, to use reserves for the purpose for which they were surely intended? They exist as insurance against lean times. Why buy an umbrella and then refuse to put it up on a rainy day in case it gets wet? It is true that we have an ageing population, but this is a long-term problem that requires long-term solutions, not a knee-jerk tax rise.
The doomsday deficit scenario that the government presents is perhaps most worrying because of the lack of confidence it betrays in Hongkongers to overcome any difficulties that the future may hold. I do not share that pessimism, and I don't believe the majority of people share it, either.
On the other hand, we are also told, perhaps most tellingly, that things may not turn out so badly. In that case, we are told, the money raised by a GST can be used to reduce profits and salaries taxes and subsidise the grass roots. Where, then, does that leave the fundamental objective of broadening the tax base?
The argument for a GST is a muddle wrapped up in bad maths, inside an enigma. The only sensible solution is for the government to lift its head out of the sand and listen to the people.
James Tien Pei-chun is chairman of the Liberal Party
