Hong Kong's Economic Restructuring And Tax Reform Study

The financial deficit budget of Hong Kong in 1999 was as high as tens billions. The Government considered that the first priority was to solve the financial deficit, or else. it could hinder the recovery of economy. The Government also warned the citizens that they should share the responsibility of reducing the deficit and hence the tax increase became unavoidable. The Government considered the urgency of the innovation of the taxation system and the necessity of charging consumer tax. The economy of Hong Kong was under a downturn period and could be further damaged if the Government charged consumer tax without sufficient consultation and justification. the serious consequence could be the extreme dissatisfaction of the residents and the matter of economy could become politicalized.The cause of the financial deficit in Hong Kong originated from the internal over expenditure of the Gov. and the over reliability on the occasional income of selling land. When the Hong Kong Gov. considered tax increase, it should first consider how to broaden the variety of tax and adopt the simple and practicable way for tax increase. The complementary tax of the corporation in Hong Kong was based on the place of origin where the profits were generated. It was suggested that the tax should be charged during the course of a commercial transaction, which would vary the items of taxation. Whilst the Gov. should implement the taxation of user responsible policy as to charge the environmental tax of using plastic bag. While the Gov. could increase the revenue of tax, the concept of environmental protection could also be promoted. While the Gov. endeavored to reduce the expenditure, it could consider privatizing the public corporation and services and placed those corporation and services on the stock market. The Gov. could generate more income while to save the expenditure of rnaintnining that part of civil services.Hong Kong Government should not reply on the taxation reform which was not the effective prescription to reduce the financial deficit, but should emphasize on economic development. If the structure of economy and industry could be transformed smoothly and successfully, the problem of unemployment could be solved. The revenue and taxation could be increased followed by the recovery of the economy and hence the public financial deficit naturally could be reduced. Since the manufacturing industry had been moved to the mainland China from the 80's, Hong Kong was no longer the center of manufacturing industry. If Hong Kong wanted to maintain the comparative privilege and to keep pace with the development of theinternational industry, it must transform its type of labour and capital concentration to capital and technology concentration. If Hong Kong solely developed the services industry in the future, the capacity of global competition would be behind the other competitors. Not only this, the privilege of the finance industry and transportation industry would be datnaged. The "double track" development for the economy in the future would be more reasonable. The scientific and technological industry was developed too late and it was due to the actively nonintervention policy in the past and the lack of long-term industrial policy.It was time for Hong Kong to consider whether the actively nonintervention policy was still the golden rule. The success of the transformation of the structure of the Hong Kong economy also relied on if Hong Kong could seize the current privilege and opportunity. If Hong Kong still considered the actively nonintervention policy the golden rule, it would not accord with the current situation but also hinder the observation and overcoming the current pressing problems of the economy of Hong Kong.