Ordinary Gweilo

Earlier this week Henry Tang said that the government would consider introducing some exemptions from GST (Tang unveils sales levy concessions – subscription required):

On the public’s call for daily necessities to be exempted from a GST, Mr Tang said he would consider exemptions on public transport, medical fees, and primary and secondary school fees. The exemptions would cost the administration a total of HK$1.4 billion.

Today the SCMP has a rather curious editorial on the subject (Rigorous GST debate should be encouraged). 

What is disappointing is that the government has responded primarily to the populist arguments but dodged the intellectual ones. It is difficult to understand why it has opted to do that. One would have thought officials would try to win opinion-makers over to their side, so they could be enlisted to help secure public support for a GST. Instead, officials have chosen to go down the populist route too [by announcing exemptions].

The major thrust of intellectual dissent targets the government’s rigid view of how it should manage its finances. Critics have questioned the need to treat land sales proceeds and land premiums as capital revenue that can be used only for infrastructure spending. Given the recurrent nature of such receipts, they wonder if there would still be a need for a GST if all or part of these revenues could be used for recurrent purposes. Arguably, the Hong Kong way of auctioning development rights already amounts to levying a sales tax on everyone, albeit indirectly through high housing costs.

Well, it was OK up until that last sentence, which is just nonsense.  The facts are that a substantial part of the population live in public housing and so do not have to pay this indirect tax.  Well, to be strictly accurate they do pay a small part of it in an even more indirect way (because rents from commercial buildings get passed on to customers as higher prices), but that is insignificant compared to the high housing costs paid by the rest of the population.

Since the government wants to introduce GST to extend the tax base, with the unspoken justification being that many people who benefit from public housing should also pay some tax, one might hope that the SCMP leader writer could get the facts right.  Especially when they are calling for a ‘rigorous’ debate on the real issues.