Not if, but when: Higher taxes needed in Hong Kong to ensure a sustainable future for its citizens
Alex Malley says with an ageing population and a growing income gap, the government will have no choice but to implement reforms to ensure the city can prosper

Hong Kong’s long-term economic and social challenges, from an ageing population to a widening income gap, are generally well known and have been discussed for many years. Given the constraints of a relatively narrow and increasingly volatile tax base, it is not a question of whether these challenges will place significant pressure on the government’s finances, but when.
Such a review is likely to conclude that a goods and services tax at a low rate with suitable compensation mechanisms should be a part of Hong Kong’s tax mix
I found it particularly encouraging to see the recent launch by the Commission on Poverty of public engagement on a retirement protection system. Similarly, the comments by Secretary for Financial Services and the Treasury Chan Ka-keung regarding the inevitability of the need to raise tax revenue and introduce new taxes due to the fiscal gap brought by an ageing population also ring true.

An essential part of addressing these challenges is to debate, develop and implement a long-term and comprehensive tax reform agenda. We made just such a recommendation to the government in 2012, when we highlighted the merits of a “root and branch” review of the system with a view to instigating reforms that would give Hong Kong the best opportunity to prosper.
Among other things, we recommended it should model the economic, revenue, social and household impacts of proposed reform options. Such a review is likely to conclude that a goods and services tax at a low rate with suitable compensation mechanisms should be a part of Hong Kong’s tax mix.