The Working Group on Long-Term Fiscal Planning has suggested that a future structural fiscal gap will require the Government to find additional tax revenue. Hong Kong’s overall fiscal position in the short- to medium-term remains healthy. In the longer term the group considers that the Government must seek to align the growth rates of its revenue and expenditure.
On taxation, the Working Group recommends that the Government should “preserve, stabilize, and broaden the revenue base, by stepping up tax enforcement and reinforcing principles such as cost recovery, user pays, and polluter pays.” It also recommends that the government should consider introducing new revenue items when new policies or services are implemented – for example, waste collection fees or “green” tax.
The Hong Kong Government should avoid an over-reliance on direct taxation, and should not rule out new revenue sources. The Working Group admits that “steps to broaden the tax base are bound to be controversial, as evidenced by the lack of public support for a proposed goods and services tax (GST) in the context of the Government’s public consultation on tax reform conducted in 2006.”
Hong Kong’s Financial Secretary has suggested that the Working Group should give a more comprehensive analysis, however the possibility of major tax increases has been ruled out.
