Hong Kong doesn’t need a sales tax

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Although Hong Kong is currently enjoying a period of economic stability, many people still remember the difficult time they experienced during SARS and economic downturn. They are worried that the Government will not have enough revenue to maintain existing levels of services in the future because of the narrow tax base. Financial experts have suggested the implementation of a sales tax (Goods and Services Tax) in Hong Kong. I disagree with this proposition and I have three reasons to support my view. Firstly, it may be difficult to impose a sales tax on consumers.

Many shoppers buy from street vendors or small business, which rent a temporary space to do business for a limited time. Unlike chain stores or supermarkets, they may not even have a valid business licence. This makes it difficult for the Government to collect a tax from them based on the amount of business they do every day. Although tourists will get their sales tax refunded when they leave Hong Kong, it will be costly, time-consuming and inconvenient for Customs to check their goods and calculate their refund. To compensate for the high administrative cost, the Government will have to impose a high sales tax, for example ten per cent more.

Secondly, a sales tax will increase the financial burden on low-income families in Hong Kong. Over sixty per cent of the local population has an income that is below the threshold for income tax. An increasing number of people are on social welfare. If a sales tax is imposed, their lives will be even more difficult. Many old people who live alone suffer from malnutrition because they can only afford ten dollars a day for food. Besides, many restaurants patrons may decide not to leave a tip if they have to pay a sales tax in addition to the ten per cent service charge.

This will reduce the income of low-skilled workers in the service industry even further. Last but not least, the implementation of a sales tax in Hong Kong will damage our reputation as a ‘shoppers’ paradise’. Many tourists come to Hong Kong to go shopping because of the variety of goods in the market and their relatively low price. If a sales tax is imposed, they will have less incentive to visit Hong Kong. Since Hong Kong’s primary tourist attractions are its shopping and its restaurants, we may lose our major source of tourist income. In this way, many people’s livelihoods will be affected.

The difficult times that the service industry experienced during the SARS crisis are a good illustration of what can happen to Hong Kong when tourists decide not to visit. To summarise, there are too many drawbacks to the implementation of a sales tax in Hong Kong. The Government may face great difficulty in trying to collect a sales tax from hawkers and small or temporary businesses. In addition, the tax would increase the burden on low-income earners and damage Hong Kong’s reputation as a ‘shoppers’ paradise’. Therefore, I strongly disagree with this proposal.

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