This Motion urges the Government to make better use of public finance for advancing dynamics of economic creativity of Hong Kong. Undoubtedly, competitiveness of our economy is strenuous and even declining in recent years. If we were insensitive and did not revive our spirits, our future would be worrisome.
Frankly, Hong Kong is facing many difficulties. Our ranking in competitiveness has fallen from 1st place to 3rd. University of Hong Kong has fallen eight places to 43rd on the global league. Although these rankings are not poor, on further exploration it is evident that our competitiveness is losing ground. We should not be remiss. I am most concerned that some might still disbelieve that Hong Kong is in trouble.
We seem to have an almost endless list of problems, like surging property price, climbing rental, intensifying poverty, falling education standard, imbalanced economy, worsening business environment. These prolonged problems have been disturbing for some time with direct or indirect impacts on competitiveness. If we still subscribe to our good old policy of positive non-interventionist indiscriminately and are reluctant to redress, Hong Kong would sink. Moreover, rivals are aggressively challenging us in different ways. If we were not conscious of these developments, we might even lose our leadership of international finance center. Hong Kong might then be incapable of feeding our 7 million people.
That said Hong Kong still has strengths and advantages, despite these challenges. So long as we are determined to realize them, we would still be capable of breaking the impasse. One of our advantages is strong public finance with fiscal reserve of HK$700 billion. I support the suggestion to make better use of it. Actually, we are more fortunate than those struggling economies, thanks to a comfortable public chest. We should make better use for social and economic benefits of the people.
Of course, I do not encourage indiscriminate spending. I am also against cash distribution without cause. If we could make better use of public finance to address social problems and advance competitiveness, they are investment for future that might bring higher yields to the Treasury. We should refrain from becoming miser and should spend at the right time in the right way. All reserves, however large, would exhaust if not replenished. Only investing in future would generate wealth incessantly.
On the other hand, I support studying how to widen Hong Kong’s tax base. I could not agree more to developing the economy as priority. If more wealth is generated, more tax revenue is forthcoming. Actually, tax cuts deserve due consideration if it would stimulate the economy. In the past, I have repeatedly urged the Government to promote “headquarters economy”, attracting foreign enterprises to locate regional headquarters in Hong Kong. It would stimulate the economy and create jobs. Tax concessions are essential to successful headquarters economy but the Government seems to be indecisive.
Of course, there are voices against tax concessions. They argue that only business concerns would benefit. Academics are arguing that tax reduction would stimulate the economy and bring in more revenue. Abolition of Estate Duty is a case in point. Following tax abolition, Hong Kong is becoming an international estate administration centre. It has been an innovative policy. Similarly, fine tuning Profits Tax could stimulate investment and advance competitiveness, bringing in additional revenue. Moreover, I support cutting Salaries Tax to ease personal tax burden particularly the middle-income class. In turn, it would stimulate consumption for the benefit of retailers.
I fully understand the controversies of tax cuts. Some might even argue that it would shake the stability of revenue. Therefore, I would suggest a pilot of, say, two years. Following evaluation, the Government might decide whether they would be formalized or scrapped. Such flexible approach should address anxieties of opponents. Actually, Singapore, our rival, has been adjusting tax rates in response to economic and trade performance to improve competitiveness. These are valuable experiences to borrow.