Wednesday, 27th September 2006

Dear Reader,

Myth number 4 on the GST proposal: The Profits Tax base is "paid by too few taxpayers" and is "not in line with the Global norm". The Government says "the top 800 companies pay 60% of the total Profits Tax", and implies that somehow, the others are not paying their fair share. Fact: they are all subject to tax at the same rate of 17.5%. If the Government is really suggesting that smaller companies are understating their profits, for example, by deducting personal expenses of the owner, then that is an enforcement issue, not a defect in the tax system.

As for "the global norm", in 2001, KMPG reported to the Government's Advisory Committee on New Broad-based Taxes. They wrote "Hong Kong's corporate tax is less concentrated in the terms of fewer payers than other developed jurisdictions". They reported that the top 1.0% of HK companies paid 63% of profits taxes, while 1.1% of Australian companies paid 75% of such taxes, and 1.6% of Korean companies paid 82% of such taxes. So what? All this really says is that, like other markets, we have some very large companies who make a large share of the profit and pay a corresponding share of the tax. But they are all charged at the same rate.

Recently, there was been renewed attention on the amount of Government intervention in the economy. Which brings us on to today's article:

Commissions for Labour (27-Sep-06)
The HK Government seeks to increase its intervention in the private contract between providers and purchasers of labour services, by imposing requirements to include commissions in holiday pay. In a submission to the Legco Panel on Manpower, we urge the Government to step back and let the free market function.

Avoiding the Logjam (26-Sep-06)
Hong Kong is gradually being submerged in a landslide of printed IPO prospectuses, some running to almost 1,000 pages in bilingual form. proposes a solution which can be quickly implemented and avoids a long wait for enabling legislation. (26-Sep-06)

Submission to Legislative Council on Rail Merger Bill (25-Sep-06)
In response to an invitation from the Legislative Council Bills Committee, editor David Webb urges the Government to stop wasting scarce legislative resources and rethink the rail merger proposal and its transport policy in general. If the proposal is not amended, we will lead a campaign for 300,000 minority shareholders to protect value by voting it down.

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