January 17, 2006

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Civil servants are different

David Webb has letter of the week in SCMP today, commenting on the fanciful theory that Hong Kong will outlaw "expat" packages:

I refer to the article "Race law to put tough curbs on expat deals" (January 11).
If Deputy Secretary for Home Affairs Stephen Fisher is serious about denying permanent residency to anyone getting what he calls "expat packages" or "overseas terms", then would he please tell us how many civil servants of his grade or above receive housing, rental allowances, overseas education for their children, air-conditioning allowances and other perks from their employer?

What utter hypocrisy.

The form of remuneration should have no bearing on a person's eligibility for permanent residency. Employers should be allowed to remunerate employees in whatever form they choose to recruit and retain talent, whether from Hong Kong or overseas, permanent resident or not. The total cost of compensation reflects the free-market value of an employee to an employer. How it is structured, in cash or benefits, is usually driven by other considerations.

The government should instead remove its fiscal incentive to structure packages. Employees should be taxed on the full value of all benefits received, including housing. Currently, housing or rent is only deemed to be worth 10 per cent of the value of the other income from the employer.

Civil servants in aggregate are probably the greatest beneficiaries of this. If housing were taxed at its rateable value, broadly equivalent to market rent, then the government could afford substantial cuts to the percentage rate of salaries tax without reducing inland revenue. Tax employees on what they are paid, not how they are paid.

You can hear the choking on Albert Road from here.

posted by Simon on 01.17.06 at 11:15 AM in the Hong Kong category.


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Expect no change in the housing RENTAL allowance because of the housing OWNERS allowance.

Extract for Sir Donald Tsang's Budget speech 1997-1998:

"Any help which the Government provides to promote home ownership should be given specifically to those families which need such assistance. For this reason, we have established the Home Ownership Scheme, the Sandwich Class Housing Scheme and the Private Sector Participation Scheme. These have already helped some 220,000 households to buy their own homes. I believe that these programmes are far more effective than tax relief would be. I also urge Members to look at the way in which home ownership has expanded even in the absence of tax concession for [m..tgage] interest. Between 1991 and 1996, the number of households owning their own home rose by 22 per cent. Today, more than 50 per cent of households own their own home."

It is not going to change on grounds of fairness. It's the money, see.

posted by: gunlaw on 01.19.06 at 05:43 PM [permalink]

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