In his budget speech, the financial secretary told us that the Hong Kong Special Administrative Region government budget showed a healthy surplus. However, this is no cause for celebration. The primary reason for the better-than-expected surplus is that revenue from land premiums is significantly higher than was projected. This once again highlights the ongoing dependence on land sales and related income, which, while it may be positive for our public finances, is unhealthy for society as a whole. Property prices continue to be sky-high, resulting in housing costs and quality that continue to be unacceptable, especially for the grassroots.
We need a robust public finance system but not one that leads to social inequality. Our public finance system needs to change. The debate on broadening the tax base has continued for many years, and with widening inequality aggravated by COVID-19, it is time for the government finally to take drastic action. A progressive rating system for domestic properties as now proposed by the government is welcome, but more far-reaching changes are required. The government should consider introducing a goods and services tax (GST) and enlarging the scope of the salaries tax to include other income sources such as dividends.
The criticism most often leveled against a GST focuses on its regressive nature, and accuses the tax of penalizing the less well-off, who typically spend more of their income on immediate consumption, but this problem can be addressed by excluding food and basic housing items from the scope of the tax. In addition, the government should ring-fence GST income and commit that the revenue derived from it will normally be used for programs to assist the grassroots.
The financial secretary did not mention the Mandatory Provident Fund, the function of which is to provide old-age security for employees. The overriding priority must be for the MPF to achieve improved retirement benefits, especially for lower-paid workers, so that they can enjoy genuine peace of mind in their old age. One current major shortcoming of the MPF is the presence of offsetting arrangements that enable long-service and severance payments to be deducted from employees’ accrued MPF benefits with the risk of thereby severely reducing what will be available for their retirement protection, particularly in the case of low-paid workers who tend to change employment more often, something that has been worsened by the effects of the pandemic. The Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 was only introduced into the Legislative Council for scrutiny at the end of last month, and the bill is not planned to be brought into force until the full implementation of an eMPF platform, the proposed new electronic one-stop platform for the MPF system, which is expected to come into full operation only in 2025 at the earliest.
Those affected by the offsets will, consequently, see no improvement to their situation for an unnecessarily long period. To help the lower-income earners and make the MPF meaningful, the government should implement interim measures, such as using a sum of the order of HK$5 billion ($640 million) to make good offsetting deductions during the transition period before the amending legislation comes into force. On a broader plane, the government should look into ensuring that the accrued MPF benefits will prove genuinely helpful rather than a derisory token sum. An effective means of achieving this would be an increase in the MPF contribution rate to 15 percent of salary from the present 10 percent for all employees, with the addition coming from a new government contribution of 5 percent.
It is welcome that at this moment of crisis and hardship, the financial secretary has proposed providing support for the temporarily unemployed by granting a subsidy of HK$10,000 to each eligible person. However, it is also important to ensure that low-paid workers are earning a reasonable and decent income under normal circumstances. Sadly, this is not the present reality because the minimum wage in Hong Kong is much lower than a living wage, which is defined as that required to live at a decent basic standard. The government has put in place the Working Family Allowance Scheme as a form of income supplementation, but its application processes and administration are unnecessarily complex. We have proposed a simpler mechanism: The government should provide an income supplement to those earning less than a living wage. This would be up to HK$6,000 a month to those living in private rental accommodation and up to HK$3,000 a month to those living in public housing or family-owned housing.
Lastly, it has been a long time since the Comprehensive Social Security Assistance (CSSA) program has been the subject of a fundamental review. The current practice of adjusting CSSA payments based on changes in the consumer price index is necessary but not sufficient. Society and people’s needs have changed, and an overall review is required to draw a full picture and make necessary amendments, including the levels of payments and the items to be covered by the payments. We believe it likely that an overall increase of 25 percent in average CSSA payments is justifiable.
Our public monies should be used to build a more-equal society, and the motivation to produce more-just outcomes should be particularly strong at this time when the grassroots have been so hard-hit by the effects of COVID-19. The people of Hong Kong deserve an ongoing improvement in common prosperity rather than ad hoc handouts of cash sums and minor benefits.
The Business and Professionals Federation of Hong Kong is a non-political, non-factional think tank in Hong Kong that puts the overall interests of Hong Kong above those of individual sectors. It does not shy away from controversial issues, be they political reform, healthcare reform, retirement protection, the minimum wage, or broadening the tax base.