Time to open the coffers

Top News | Phoenix Un 14 Feb 2017

Chief executive candidate Carrie Lam Cheng Yuet-ngor yesterday promised to spend, spend, spend if elected - on education,subsidized housing for first time flat buyers and tax reductions.

In detailing her preliminary electoral platform, Lam advocated an increase in recurrent education expenditure by HK$5 billion a year - a 6.7 percent rise from the current annual budget of HK$74.7 billion.

She said that, since the handover, education expenditure had not grown in line with economic growth as it was only 21.5 percent of gross domestic product. Her proposed increase would bring back government expenditure on education to the 2012/13 level, she said.

"I am not here to blame anyone," Lam said.

"It's a cash-rich government. It could afford to spend more for the people. It's time to spend and invest in the right place to nurture our younger generation."

She said the funding boost would turn contract teaching posts into permanent ones, establish a pay scale for kindergarten teachers, enhance assistance to integrated and special education, and subsidize high school graduates on local self-financing bachelor programs.

Lam said the measures would create a stable environment for teachers and ease students' workload.

On the economy, Lam proposed two new tax measures to relieve the burden of small- and medium-sized enterprises - a move she said would boost investment in research and development.

She said the two-tier profits tax regime would allow the tax rate of the first HK$2 million profits of all companies,large or small, to stand at 10 percent instead of the original 16.5 percent.

Lam explained that even giant corporations would be covered by the tax cut because she appreciated the SAR's simple tax system.

"If every company can enjoy the tax cut, then SMEs will definitely benefit.

"For giant corporations, a 6.5 percentage point tax cut for HK$2 million profit will only mean HK$130,000 more.

"We shouldn't design a complicated tax system just to prevent giant corporations from enjoying the cut."

She also proposed "super deductions" for investments in innovation and technology, research and development, environmental protection measures, arts and culture and design.

She cited the city's low expenditure on research and development - less than 1 percent of GDP over the past decade, compared with 4 percent in South Korea, 3.5 percent in Japan and 2 percent in the mainland. She suggested expenses on R&D could get a tax deduction of up to 200 percent.

Lam insisted the government is rich enough to achieve revenue reduction while increasing its expenses.

"On March 31, 2016, our financial surplus stood at HK$917 billion, which means the expense of the SAR in two years with no revenue at all. So do we have enough money for the measures?" she asked.

Lam also acknowledged that flat prices are beyond the reach of most buyers, especially the young.

She pledged to take "a macro view" of the housing issue, and look at ways to create more land for building homes, saying every way to create land resources has its pros and cons.

"When we suggest reclamation or urban planning, we stop when people show dislikes. When we just touch the country parks, they also show dissatisfaction. We then end up at a standstill."

She said it would take a typical two- member family earning HK$60,000 a month about 12 years to save for the down payment of a HK$6 million flat.

As part of her pledge to allow more young people to own their homes, she vowed to form a task force charged with expanding land resources.

She said there should be more flats under the Green Form Subsidized Home Ownership Pilot Scheme, and an extra layer of subsidized housing which bears similarities to Sandwich Class Housing Scheme to assist the middle- class to buy their own flats.

Lam said she would not issue her complete political platform until the beginning of March, but stressed that the platform does not represent the whole of her leadership, as integrity is also important.

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