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Government has successfully carried out many bold and imaginative plans to improve communications, amenities and recreation facilities for the general public. What follows is an attempt to isolate the more obvious of the problems which remain in the fiscal, social and
institutional fields.
Fiscal
4. The most obvious distinction between Hong Kong and other
industrial societies at a comparable level of development is the comparatively low, narrowly based and, at certain levels, regressive nature of direct taxation. (It is of interest that only 86,000 out of the total population pay salaries tax and no taxes are levied on income arising from investments abroad.) To some degree it must be
accepted that the present system has been conducive to growth; that growth has resulted in a rapid rise in taxation receipts (from SM1808 in 1970/71 to an estimated $13612 in 1975/76); that
political uncertainties require a measure of discount for foreign
and domestic investment; and that in the 1950's and 1960's there were non-fiscal constraints on the growth of certain kinds of social
expenditure. More recently, however, a school of thought has been developing which believes that self-imposed fiscal limitations have unnecessarily restricted implementation of social policies which are essential for the balanced growth of an industrial society; that the argument that investors will cease to invest if direct taxation were more widely based and the 15% limit payable by any individual raised, lacks conviction; and that Hong Kong's strength as a commercial, banking and communications centre would continue to be attractive to investors if tax rates were higher and the tax burden more fairly spread among the higher income groups. Proponents of this view reject the argument often heard in Hong Kong that higher taxes inevitably entails even greater tax avoidance than at present. They believe that while some leakage is doubtless inevitable, the net
benefit to the Government revenues can be expected to be substantial. They also reject the assertion that physical capacity restraints inhibit increased public expenditure made possible by increased taxation, arguing that in the aftermath of the recession there should be scope for diverting under-used resources to the public sector.
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15.
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