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Presentation of GST_HKBU Public Administration,HKBU/CASS POLS 7050

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"Is GST an Appropriate Measure to Broaden the Tax Base in Hong Kong?”

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  • 1. IS GST AN APPROPRIATE MEASURE TO BROADEN THE TAX BASE IN HONG KONG?
  • 2. Agenda
    • Definition of GST
    • Background of GST
    • The Need to Broaden Tax Base
    • Advantage s of Introducing GST
    • Conclusion
  • 3. Definition
    • Goods & Services Tax (GST), can be defined as:
    • “ the tax a person pays on the value of the good or service that a person purchases, which has been prescribed as taxable, within a country or region, from a registered supplier .” (Vaughan & Yeung)
  • 4. Background
    • GST is:
    • An Indirect tax
    • Widely implemented, in over 140 countries
  • 5. Background
    • Government Studies on GST in HK:
    • Advisory Committee on New Broad-based Taxes (2000)
    • Internal working group (2003)
    • Public Consultation: “ Broadening the Tax Base, Ensuring our Future Prosperity: What’s the Best Option for Hong Kong? ” (2006)
  • 6. The Need to Broaden Tax Base
    • (1) Highly Volatile Government Revenue
  • 7. The Need to Broaden Tax Base (1) Highly Volatile Government Revenue
  • 8.
    • (2) Dependence on a Minority of Taxpayers
    The Need to Broaden Tax Base Profits Tax Contributions (Corporations) (2006/07)
  • 9.
    • (3) Aging Population
    The Need to Broaden Tax Base Age Group Percentage of Total 1996 2001 2006 2008 0-14 18.5 16.5 13.7 12.7 15-24 14.0 13.7 13.2 12.9 25-34 19.1 16.5 15.3 15.3 35-44 19.0 20.3 18.2 16.9 45-54 11.0 14.3 17.4 18.2 55-64 8.3 7.5 9.7 11.3 65+ 10.1 11.1 12.4 12.8
  • 10.
    • (4) Pressure on Public Expenditure
    • Education
    • Public health
    • Elderly care
    • Social securities
    The Need to Broaden Tax Base
  • 11. ADVANTAGE S OF INTRODUCING GST
    • (1) Produce Stable Revenue and Predictable Revenue
    • Broaden the tax base
    •  large amount of domestic consumption
    •  based on consumption expenditure
    • Levied at a low rate
    • Produce significant revenue
    • A multi-stage taxing and crediting mechanism
    •  Avoidance is difficult
  • 12.
    • (2) Cope with Aging Population
    • Challenge of aging population
    •  shrink of the working population
    •  narrow the income tax base
    • Introducing GST
    •  spreading the taxation burden more evenly
    •  give financial support for elderly care, social welfare
    •  cope with the aging population problems
    ADVANTAGE S OF INTRODUCING GST
  • 13.
    • (3) Maintain Hong Kong’s Competitiveness
    • Increasing Salaries Tax and Profits Tax
    •  risk losing mobile labour and capital
    •  challenged by aging population
    • High Corporate Tax
    •  reduce the new investment
    •  restrain economic growth
    • GST (most appropriate)  broaden tax base
    •  avoid relying on Salaries and Profits Taxes
    ADVANTAGE S OF INTRODUCING GST
  • 14.
    • (3) Maintain Hong Kong’s Competitiveness
    • Singapore (GST, 1994)
    •  corporate tax rate (40%, 1986  20%, 2006)
    •  replaced by GST
    • ∴ Maintain Hong Kong’s competitiveness
      • Low-tax environment
      • Attract foreign investment and talent
    ADVANTAGE S OF INTRODUCING GST
  • 15.
    • Need to broaden tax base
    • GST is the best option
    • Produce stable and predictable revenue
    • Cope with aging population
    • Maintain Hong Kong’s competitiveness
    • Retain low-tax environment
    •  attracting foreign investment and talent
    Conclusion
  • 16.  
  • 17.
    • Vaughan M. & Yeung Y. T. Raymond (2006). GST-A Hong Kong Perspective . Hong Kong: CCH Hong Kong Limited.
    • Schenk A. & Oldman O. (2007). Value Added Tax: A Comparative Approach . USA: Cambridge University Press.
    • Advisory Committee on New Broad-based Taxes (2002). Final Report to the Financial Secretary . From http://www.fstb.gov.hk/tb/acnbt/english/finalrpt/btreport.pdf
    • Financial Services & The Treasury Bureau (2007). Public Consultation on Tax Reform Final Report . From http://www.taxreform.gov.hk/eng/doc_and_leaflet.htm.
    • Hong Kong Yearbook (1997-1999, 2008). From http://www.yearbook.gov.hk.
    References