February 15, 2006

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A dash of Hemlock

Hemlock's genius is in his ability to concisely summarise complicated issues with just the right amount of snark. Today's example is a perfect summary of the need for a sales tax in Hong Kong, Nepal, the problems of functional constituencies and the city's economic structure....all in 3 paragraphs:

IMF asks Nepal to restore peace. In a similarly utopian vein, the experts on the global economy urge Hong Kong to implement a goods and services tax. Since we have a Government that can't even push through a long-overdue few dollars' hike in cross-harbour tunnel tolls or hospital outpatients' fees, this is asking rather a lot. Our visionary leaders can't do anything that's in the interests of the community, because we're not a community. We are "various sectors" Can we ban smoking in restaurants? No, because the Catering Functional Constituency (3,900 votes cast at last election) doesn't want it. Can we increase punishments for minibus drivers who run red lights and kill people? No, because the Transport Functional Constituency (seat uncontested at last election) doesn't like it. The bigger the potential public good, the more self-serving interest groups emerge to wield their vetoes. Citizens and consumers might want better schools, cleaner air and decent homes, but providers of goods and services, and their official protectors, come first.

A sales levy that replaced other sources of revenue would benefit the thrifty, the productive and the wealth creators, such as the 17 of us who pay salaries tax. It would hit some of the lower orders; the sort of people on modest pay who will stand in a line for hours on their day off for a free baseball cap. But with their subsidized education, housing and health care, it wouldn't hurt them to contribute a bit. The pain could be considered a form of civic education. A sales tax would also be opposed by the usual tourism and retail industry vermin, who would argue that the sort of idiots who pay $5,000 for a handbag will flee our shores if we slap a few percent onto the price tag. If only life were so good.

The real potential losers, however, would be the big boys. In theory, a broad consumption levy could replace much of the revenue currently raised from sales of land and property development rights. This is the Government's slice of the wealth that is sucked relentlessly from the rest of the economy by the property cartel in the form of inflated house prices and rents, which of course cause the severe, job-destroying economic distortions and poor quality of life many Hongkongers call normal. Add to this the huge power that ownership and tight rationing of land gives to unelected officials and then consider that a universal sales tax would be the ultimate argument for universal suffrage and spreading tranquility the length and breadth of the Himalayas starts to look like a cinch.

posted by Simon on 02.15.06 at 12:25 PM in the Hong Kong economy category.


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Witty, certainly, but I detect a fundamental flaw in Hemlock's understanding of governmental extortionists (did I say that? I meant revenue raisers, of course).

To assume that any new tax "could replace much of the revenue currently raised [by other means]" flies in the face of the accepted wisdom that new taxes are merely a way of muddying the waters and increasing the overall protection racket (sorry, taxation) income of the government. Taxes are created, re-branded, and/or raised. They are NEVER replaced.

posted by: Argleblaster on 02.15.06 at 06:24 PM [permalink]

And Hemlock misses a point when he talks about who will lose. Some of us are small business people/entrepreneurs. The reporting burden this puts on people like us will significantly increase the administrative burden and directly reduce the competitiveness of Hong KOng as a place to set up shop. Not all of us are in Hong Kong on working for big companies with a large accounts department to do all the hard work.

posted by: flagrent on 02.16.06 at 11:32 AM [permalink]

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