A study of the tax base in Hong Kong
During the period from 1991 to 1997, Hong Kong had experienced prominent economic growth. However, Hong Kong? economic situation has had a slump since 1997. Instead of the consecutive seven years of positive Composite Consumer Price Index recorded before 1997, Hong Kong has encountered persistent deflation since 1998. Furthermore, the Government of Hong Kong also faces a consecutive four years of operating deficits since then.
In view of the intense financial situation encountered, the Government has targeted to reduce the total public expenditure by controlling public expenditure and raising revenue. To achieve the latter objective, the Government has introduced a number of measures in 2003-04 by increasing revenue collected from the existing taxes and introducing new taxes.
Tax revenue is a major source of income but the tax base of Hong Kong all along largely depends on income tax revenue and has been criticized for its narrowness. In a global economy, Hong Kong faces keen competition from its neighbouring countries such as Singapore for foreign investment and resources. To preserve Hong Kong? competitiveness, there is little room for the Government to expand the existing taxes especially income tax revenue. Hence, the only way to stabilize the revenue is to broaden the tax base. Despite the need to broaden the tax base, the Government is still hesitant to revise the tax system. In fact, the Government has to take into consideration both the economic and political grounds in proposing any changes in the tax system. The economic situation urges the broadening of the tax base while the political environment discourages the Government from doing so. Hence, the Government though recognizing the need to broaden the tax base by introducing the Goods and Services Tax, has not announced any detailed plan on its implementation in the 2003 Budget Speech. Against the above background, this thesis has found that there is a genuine need for the Government to broaden the tax base in the long run.
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School:The University of Hong Kong
School Location:China - Hong Kong SAR
Source Type:Master's Thesis
Keywords:taxation china hong kong
Date of Publication:01/01/2003