broadening the tax base – reply to the hksar government presented by : yvonne law and stella cho...
TRANSCRIPT
Broadening the tax base –Reply to the HKSAR Government
Presented by : Yvonne Law and Stella Cho
Date: 29 March 2007
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The Submission
Part A – Non-GST options
Yvonne Law, Chair of Taxation Committee
Part B – The GST optionsStella Cho, Council member and Co- Chair of Working Group on Tax Reform
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Background
Government released consultation document
(July 2006)
Institute set up working group
- Prepare submission
- Inform members on tax broadening issues
- Canvass views from members
- Dedicated website
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Background (cont’d)
- E-letters on key issues & inviting views- Forums, last one attended by FS- Announced survey results
FS said GST not the only or the main option (December 2006)
Submission to government
Consultation ends on 31 March 2007
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Part A – Non-GST options
Increased rates of salaries and profits tax
Decreased personal allowances
Poll taxes
Increased stamp duty on property
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Non-GST options (cont’d)
Capital gain taxes
Taxation of interest income
Tax on worldwide income
Wholesale sales taxes
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Non-GST options (cont’d)
Taxes on mobile phones and signboards
Selective consumption taxes
Import / export levy
Financial transactions tax
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Non-GST options (cont’d)
Existing options meriting further study
Increased rates on tenements
Increased stamp duty on stock transactions
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Non-GST options (cont’d)
New options meriting further study (singly or in combination)
Payroll and social security taxes A single stage retail sales tax Air, land and sea departure tax Green taxes Surcharge on utility supplies Dividend tax
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Non-GST options (cont’d)
Why some options are not suitable
Not broad-based Increased reliance on direct taxation Too volatile Easy to avoid Complex Low yield Combination of the above
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Part B - The GST option
Broad support for the proposed GST framework
(reflects many of the Institute’s recommendations)
Single low rate
Credit invoice type
Destination principle
High registration threshold
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The GST option (cont’d)
Commitment to no change for 5 to 10 years
Minimum exemption and zero-rated items
Targeted compensation
Tourist refund scheme
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The GST option (cont’d)
However, there are
Many unanswered questions
e.g. - Administrative and procedural issues
- Effects on business especially import/export trade
=>creating uncertainty
More information and explanation required
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The GST option (cont’d)
Issues to be addressed
Lessons from other jurisdictions
Detailed economic and fiscal modeling
Concerns- Impact on low- and fixed-income
groups including retirees- Hong Kong’s competitiveness
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The GST option (cont’d)
Educating the community
e.g. from direct to indirect taxation means
- greater choice
- encourage saving and investment
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The GST option (cont’d)
Type of GST system with rationale explained
- Lower rate (e.g. 3 percent)
- Adequacy of compensation package
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The GST option (cont’d)
Real costs to small- and medium-sized businesses
e.g. - Compliance costs
- Implications for not registering
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The GST option (cont’d)
Impact on import/export trade
Managing the transition
- Implementation?
- Educational programmes?
- GST support services?
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The GST option (cont’d)
Unanswered questions:
(1) Structural
- Who would administer the tax
- Roles of the IRD and the Custom & Excise Department
- Training of staff
- Investigation, enforcement and dispute resolution
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The GST option (cont’d)
Unanswered questions:
(2) Procedural
- Defining registrable entities
- Impact of group transactions
- Arrangement for bad debt relief
- Treatment of goods sold at conventions and exhibitions
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GST and tax reform
Returning net revenue to the community
Reduce profits and salaries taxes
Incentives for business
Benefits for different groups of tax payers and low-income earners
Study on Hong Kong’s competitiveness
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