The Pros and Cons of the Sales Tax

The Pros and Cons of the Sales Tax

The pros and cons of the sales tax

After the 1997 Economic Crisis, the SAR Government faces a dilemma: the government revenue in recent years has declined while the expenditure has skyrocketed. As many people lose their job, they need to receive the monetary assistance from the government. For this reason, many people are worried that the Government will slash the subsidies for education. It will not have sufficient budget to pay for the social welfare, either. At the same time, some people suggest that the SAR government should revamp its tax system and set up a sales tax so that it can increase its income.

The tax reform and implementation of a sales tax are really controversial issues since these measures will trigger lots of benefits as well as drawbacks. On the one hand, if the authority carries out the sales tax, it can have a stable income and it can alleviate the pressure of budget deficit. As we all know, a well-known investment company, Standard and Poor’s, has lowered the grade of investment environment of Hong Kong because of the deficit. They warn the SAR Government that if they cannot resolve this matter before 2010, foreign businessmen will withdraw their capital from Hong Kongto other Asian countries like Taiwan, Singapore and so on. Apparently, it is a make-or-break time for Hong Kong because if we lose this investment from overseas, our economy will definitely deteriorate. So implementation of a sales tax is crucial for Hong Kong’s future.

Besides, the tax reform and implementation of the sales tax can provide enough budgets for the government to pay for education and welfare. The proposed “3-3-4” educational reform need lots of money to upgrade the universities’ facilities and retrain the secondary school teachers. Moreover, the population of Hong Kong is ageing; therefore, the government needs to spend more on social welfare like building more hospitals and hiring more doctors.

On the other hand, these policies will lead to other problems. Hong Kong has been known as a shoppers’ paradise because visitors can purchase cheap goods here. If it carries out the sales tax, the prices of goods will certainly increase. I am convinced that it will affect our tourism since we may lose our competitiveness.

Furthermore, the sales tax scheme indicates that the government will impose a 5%tax on all commodities. It will affect the underprivileged seriously because they all need to pay tax for their essentials like food and clothes. It will unavoidably increase their financial burden.

From my point of view, the government needs to implement the sales tax to a certain extent. Even though it will affect the livelihood of Hong Kong people and tourism, we can see that implementation of a sales tax is prevalent all over the world. Many countries like Japan, the United States have already carried out this tax but their tourism is good. However, I suggest that the government lower the sales tax rate from 5%to 3% or essentials can be exempted from it so that pressure on the poor can be relieved. I do believe it can lead to a win-win outcome as the government can widen its source of income while the poor do not have to bear the burden and the mass need not worry about the subsidies for education and welfare.

Iu Lui Lee

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