HKBUPOLS 7050 Public

Administration

Topic:Is Goods and Services Tax an

appropriate measure to broaden the tax base of Hong Kong?

TSIM King Man, 09418210YEUNG Ching Yin Masahiko, 09410201

How Narrow is our tax base? Over-reliant on a limited range of tax

How Narrow is our tax base? Heavily relied on small number of tax

payers

How Narrow is our tax base? Heavily relied on small number of tax

payers

Why we Need tax reform?

The income of Hong Kong Government is unstable

Hong Kong’s advantage is weakening

Hong Kong is facing ageing problem

Principles of designing a good tax system

Neutrality Fairness Efficiency Effectiveness Simplicity and Certainty

Options for broadening the tax base

To reduce allowances from the existing base (e.g. Reduce the allowances and deductions under salaries tax)

To expand existing taxes base (e.g. Increase the tax rate of the Salaries Tax or Profits Tax)

To introduce new taxes to the base (e.g. Capital Gain Tax, Electricity Tax, Goods and Services Tax)

Evaluation

Evaluation

Evaluation

Evaluation

GST is an appropriate measure to broaden the tax base of Hong Kong?

GST

Value added tax Indirect tax Collect at each stage of production

and distribution Vendor need to register in advance

GST mechanism

GST on sale

(output tax)

GST on purchase

(input tax)

Less

Net GST payable(positive amount)

Net GST refundable(negative amount)

GST proposed in HK

Proposed tax rate 5% Registration threshold >$5million

per year Estimated annual revenue $30

million

GST pros & consPros Cons

Predictable Difficult to cancel

Low rate Tax rate raise continuously

Stable & continuous Increase admin. cost

Fair: spend more, pay more Not fair to low income group

Difficult to avoidConsumption shift to nearby regions

Only charge to large businessAlso affect medium and small businesses

Feedbacks from society

Conclusion

GST seems fit the criteria for broadening tax base

Strong objections Not the time to bring it in

EndThank you !