Ye Tanmei Commentator
The tax policy has become the focus of social attention, which is not surprising. The market economy has gone hand in hand with the progress of the tax system. According to the report, the Ministry of Finance has successfully handled the suggestions, criticisms and opinions of deputies to the National People's Congress in 2006. Statistics show that there are about 102 proposals to adjust tax policies, involving 793 delegates. Not only deputies to the National People's Congress are concerned about taxes, but in fact, every tax reduction motion of the government has aroused great public concern.
Whether taxes will increase or decrease is of course a big question. The bigger question is why taxes will increase or decrease? What effect can be achieved?
Recently, the Financial Secretary of Hong Kong, Tang Yingnian, proposed a large-scale tax reduction plan, which provides us with an excellent observation point to see through the tax issue. In Hong Kong's budget for the new fiscal year, Tang Yingnian proposed to broaden the marginal tax scale of salaries tax from 30000 yuan to 35000 yuan, and lower the two highest marginal tax rates from 13% and 19% to 12% and 17% respectively. Individual allowances and standard tax rates remain unchanged. The government will also increase the children's allowance from 40000 yuan to 50000 yuan, and the deduction for personal education expenses from 40000 yuan to 60000 yuan. At the same time, the government proposed to reduce the stamp duty on the purchase and sale of properties valued at 1 million to 2 million yuan from the current tax rate of 0.75% of the property value to a fixed amount of 100 yuan. The government has also lowered the alcohol tax, which is suggested to start from real time. Other supporting policies also include poverty alleviation measures for non tax payers. The Chief Executive of Hong Kong, Donald Tsang, praised that this budget implements the commitment of the SAR Government to "make every effort to enrich the people" and is "people-oriented".
The tax policy of enriching the people is actually to raise fish with live water. Economics uses the Laffer curve to illustrate the relationship between government revenue and tax rates. According to this model, high tax rates will weaken the vitality of economic entities, bring relief and preferential policies, increase government rent-seeking opportunities, and will not promote economic growth. However, low tax rates cannot guarantee the government to provide quality public services, and will also bring major problems. The best way is to find a balance point between tax rate, tax revenue and economic growth. Unfortunately, the balance point only exists in the curve, and the best reality is to adjust taxes as close to the balance point as possible.
The Hong Kong SAR government is confident in proposing a tax reduction plan this time: Hong Kong economy High growth for three consecutive years, higher than expected. The government's operating and comprehensive accounts have surpluses, with operating expenses of HK $195.7 billion, operating surplus of HK $38.6 billion, and comprehensive surplus of HK $55.1 billion. In terms of inflation rate, it is expected that the basic trend of inflation will slow down in 2007, and it is estimated that inflation will average 3.5% in the next four years. In other words, the increase of fiscal revenue and the reduction of inflation pressure make tax reduction possible.
A country or region will have a matching tax system and tax scale after the market economy matures. Hong Kong is like this. In order to strengthen its status as a free port, attract foreign investment and promote the development of local economy and trade, the tax policy implemented for more than 60 years has been characterized by simplicity, low tax rates and ease of operation, and has become a golden signboard of Hong Kong's market economy.
This policy has also brought negative effects, with large fluctuations in fiscal revenue and strong one-sided dependence. The main source of Hong Kong's tax revenue is a small number of taxes, such as corporate profits tax and personal salaries tax, among the direct taxes. At the same time, in order to make up for the lack of tax revenue, fees are increased. Hong Kong's non tax revenue, including land price income, property and investment, fees and other income, accounts for almost half of the total fiscal revenue, more than four times the average level of developed economies. According to the data released by Tang Yingnian during the budget of the new fiscal year last year, only about 1.2 million of Hong Kong's 3.4 million working population have to pay salaries tax, and the profit tax of more than 60 billion yuan, which accounts for a large proportion of the overall income, is only borne by hundreds of companies. As for the income from land sales, it depends on the real estate market. This tax cut does not involve the tax system, but also leaves the government free space to operate.
In order to solve the structural imbalance of fiscal revenue, companies such as S&P have strongly advocated the Hong Kong government to increase taxes, but such opinions have not been adopted because they may damage the development of Hong Kong's economic entities. In response to the deficit, the Hong Kong government raised the profit tax and salaries tax rates for the first time in the 2003/04 fiscal year. The tax reduction is also considered to be a response to the call for private tax reduction.
The tax policy should focus on balance: first, the balance between fiscal revenue and the burden of taxpayers. The premise is that the government budget is under the strict supervision of relevant parties and all sectors of society, so as to prevent administrative costs and fiscal revenue from rising together; The second is to balance tax revenue with economic development and economic model, rather than simply being used as a tool to adjust and control the deficit. This can also prevent us from blurring our vision again and again with such paradoxical theories as high taxes to restrain high prices and broad currencies.
