GST-related articles

Hong Kong drops sales tax plans

The Hong Kong government has dropped plans to introduce a new sales tax in the face of public opposition.It had hoped that a goods and sales tax (GST) would bring in an extra $3.8bn (£1.9bn) in revenues to boost the city's public services budget.
Hong Kong currently has one of the world's lowest tax regimes, with a 16% personal rate and 17.5% for businesses.
Critics said a new sales tax would hit lower income groups disproportionately and could also hurt tourism.

Budget deficits
The government had held a nine-month consultation on the planned tax reform.
It has said that the territory needs to boost its sources of public revenues in order to cope with the welfare burden of an ageing population and any potential economic downturns.
The city ran up large deficits in the late 1990s after the Asian financial crisis.
"Although the public understands that GST can broaden our tax base, it is clear from the views collected that we have not been able to convince the majority to accept GST as the main option to address the tax base problem," said Financial Secretary Henry Tang.
At the moment only 35% of Hong Kong wage earners pay income tax, and the government has previously suggested that it could look at reducing personal allowances to get more people into the tax net.

Hong Kong backs off on sales tax - Business - International Herald Tribune

Widespread public opposition forced Hong Kong's government to back down Tuesday on a proposal to introduce a sales tax on goods and services.

"We accept that at this time we do not have public support or the right conditions" to introduce the tax, Financial Secretary Henry Tang said.

A goods and services tax of 5 percent was proposed to broaden Hong Kong's tax base. A nine-month consultation started in July and the government has so far received 2,200 written comments.

"For the remaining part of the consultation we will not be advocating" the planned sales tax, Tang said.

Tang and Chief Executive Donald Tsang have said that government costs are rising and that a sales tax would be a more stable source of revenue than taxes on salaries and profits. Opponents say sales taxes hurt the poor and small businesses.

Tsang said that he and all members of the government's executive council backed Tang's decision.

Retail sales growth unexpectedly eased in October as tourist arrivals increased at the slowest pace since China loosened visa rules for visits to the city three years ago, a report this week showed.

The consultation on the sales tax will continue as scheduled.

Tang said, "By March next year, upon conclusion of the consultation, we will draw up a report for consideration by the government of the next term."

The government and credit agencies say the tax base is too narrow, making public finances vulnerable during economic downturns.

Such a downturn occurred as recently as in the years after the 1997-98 Asian financial crisis, when the government ran up a series of large budget deficits.

Government finances are now back in surplus after three years of robust economic recovery, but the government says that an aging population will put further pressure on the budgets in the future.

Retailers and other business groups have vehemently opposed a goods and services tax, saying it would hurt tourism.

At the same time, many members of the public say that there is no need to introduce a tax now that the economy is doing well.