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HKBUPOLS 7050 Public
Administration
Topic:Is Goods and Services Tax an
appropriate measure to broaden the tax base of Hong Kong?
TSIM King Man, 09418210YEUNG Ching Yin Masahiko, 09410201
How Narrow is our tax base? Over-reliant on a limited range of tax
How Narrow is our tax base? Heavily relied on small number of tax
payers
How Narrow is our tax base? Heavily relied on small number of tax
payers
Why we Need tax reform?
The income of Hong Kong Government is unstable
Hong Kong’s advantage is weakening
Hong Kong is facing ageing problem
Principles of designing a good tax system
Neutrality Fairness Efficiency Effectiveness Simplicity and Certainty
Options for broadening the tax base
To reduce allowances from the existing base (e.g. Reduce the allowances and deductions under salaries tax)
To expand existing taxes base (e.g. Increase the tax rate of the Salaries Tax or Profits Tax)
To introduce new taxes to the base (e.g. Capital Gain Tax, Electricity Tax, Goods and Services Tax)
Evaluation
Evaluation
Evaluation
Evaluation
GST is an appropriate measure to broaden the tax base of Hong Kong?
GST
Value added tax Indirect tax Collect at each stage of production
and distribution Vendor need to register in advance
GST mechanism
GST on sale
(output tax)
GST on purchase
(input tax)
Less
Net GST payable(positive amount)
Net GST refundable(negative amount)
GST proposed in HK
Proposed tax rate 5% Registration threshold >$5million
per year Estimated annual revenue $30
million
GST pros & consPros Cons
Predictable Difficult to cancel
Low rate Tax rate raise continuously
Stable & continuous Increase admin. cost
Fair: spend more, pay more Not fair to low income group
Difficult to avoidConsumption shift to nearby regions
Only charge to large businessAlso affect medium and small businesses
Feedbacks from society
Conclusion
GST seems fit the criteria for broadening tax base
Strong objections Not the time to bring it in
EndThank you !