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November 18, 2003
You are on the invidual archive page of Tax time. Click Simon World weblog for the main page.
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Tax time
It's tax time in HK. The place is well known for its low (16%) personal income tax rate. What's less well known is out of a working population of 3.5 million people, only about 1.25 million pay any tax at all. At the same time the Government has had yawning deficits. Worst of all is one of the solutions was to impose a tax on the helpers, who earn about US$500 a month. This is instead of expanding the tax base by introducing a sales tax, or introducing a second tier of say 25% income tax for earnings above a high level. Even at 25% the level is low compared to most other countries. Or lower the threshold where tax starts to get paid to include more people. It's not rocket science. Yet there is remarkably little debate on this. Everyone in HK seems content to run down the fiscal reserves instead. The Government is even reluctant to issue bonds to finance infrastructure building. The reality is HK cannot live beyond it's means forever and eventually these things will change. posted by Simon on 11.18.03 at 10:39 AM in the
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There has been some debate, but the government are hoping that their revenues from property will start to increase and that will sort out the problem. In fact, of course, high property prices are a hidden tax that affects more people than income tax and profits tax together. The big winners are those in subsidised housing who pay very little for their housing, and probably not much income tax either. The question is whether the government will be brave enough to do something about this by increasing rents to reasonable levels. I'm betting that they'll keep putting it off. posted by: Chris on 11.18.03 at 07:47 PM [permalink]I'm bothered by the proposed tax that helpers would bear, especially when reviewed next to the fact that some people I know (western ex-pats, but I suspect it is more widespread) avoid paying Hong Kong taxes. Hong Kong law allows them to set up a company through which they feed ALL their families' living expenses thereby lowering or eliminating the profit of said fake company. Now, tax loopholes are meant to be used to reduce taxes, but it is simply wrong, I believe, to give nothing back to Hong Kong when it provides many of us with a fine first-world standard of living. In part courtesy of the afore-mentioned hard-working helpers. posted by: Virginia on 11.19.03 at 07:16 AM [permalink]I think the tax on domestic helpers is already in place. The way it works is that the employer pays the money to the government when they sign the contract and then over the next 24 months the helper's salary is reduced by a corresponding amount. However, the employer could carry on paying the original salary and pay the tax themselves if they wished. Tax avoidance exists all over the world, and it's almost always the rich who do it... posted by: chris on 11.19.03 at 05:37 PM [permalink]I think Chris is right and the tax is already in place. I just find it bizarre that Filipino and Indonesian helpers are considered worthy of paying tax, whereas Hong Kongers can earn almost twice as much before they have to start paying tax. As for tax avoidance, one of the so-called advantages of a low flat tax rate is to cut down on it. Obviously human nature is such that even at such a low rate people try and duck it. posted by: Simon on 11.19.03 at 05:43 PM [permalink] |
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