XN000022-1993-06-02 — Page 19

6

WEDNESDAY, JUNE 2, 1993

1

BUT MR FUNG BELIEVES WE SHOULD GO MUCH FURTHER. LET ME FIRST WITH TAX POLICY.

DEAL I DO NOT BELIEVE THAT WE SHOULD INCREASE TAXES UNLESS THIS IS NECESSARY FOR REVENUE PURPOSES AND GENERALLY SPEAKING WE HAVE IN RECENT TIMES BEEN IN THE FORTUNATE POSITION THAT MAJOR INCREASES IN REVENUE THROUGH TAX INCREASES HAVE NOT BEEN NEEDED.

—

BUT THE LOGIC OF MR FUNO'S POSITION IS THAT REGARDLESS OF OUR REVENUE NEEDS, WE SHOULD RAISE TAXES ON THE BETTER-OFF, SO AS TO REDUCE THEIR NET INCOME. REDUCING TAXES FOR THE LESS WELL-OFF DOESN'T REALLY ARISE, BECAUSE AS I HAVE ALREADY POINTED OUT, ABOUT HALF THE EMPLOYED POPULATION ALREADY PAYS ZERO SALARIES TAX.

BUT WHAT WOULD BE ACHIEVED BY SUCH A POLICY, OTHER THAN MAKING RATIOS OF INCOME DIFFERENTIALS LOOK BETTER? HIGHER TAXES ON THE RICH, OR ON COMPANIES, WOULD ACT AS A DISINCENTIVE TO INVESTMENT, TO AND

EFFORT

BUT

AMBITION, AND TO GROWTH. THE LESS WELL-OFF WOULD NOT BENEFIT QUITE THE REVERSE; WITH LOWER GROWTH COMES NOT ONLY LOWER REVENUE MORE IMPORTANTLY LOWER EMPLOYMENT AND A SLOWER INCREASE IN OUR STANDARD OF LIVING. SIMILARLY, MR YF HUI'S SUGGESTION OF A WAGE

MINIMUM WOULD HARM, NOT HELP, THE LOW-PAID WORKERS WHO COULD RISK UNEMPLOYMENT AS A RESULT,

-

SO LET ME MAKE IT VERY CLEAR. IT HAS NOT BEEN - AND IS NOT ONE OF THIS ADMINISTRATION'S AIMS TO SEEK ΤΟ LEVEL OFF DIFFERENTIALS.

INCOME NOR I BELIEVE IS IT AN AIM THE COMMUNITY AT LARGE

SUPPORTS.

-

BUT I WOULD GO FURTHER I BELIEVE THAT FOCUSSING ON INCOMES, ON MEASURES OF INCOME DIFFERENTIALS LIKE THE GINI COEFFICIENT UNHELPFUL AND HAS LED SOME DOWN THE WRONG PATH.

IS

MUCH

LET ME FOCUS ON THE GINI COEFFICIENT. THERE HAS BEEN LOOSE TALK IN HONG KONG ABOUT THE GINT COEFFICIENT. I DO NOT THINK THIS CONCEPT IS VERY HELPFUL WHEN IT COMES TO ASSESSING HONG EXPERIENCE OF

KONG'S SUBSTANTIAL REAL GROWTH IN INCOMES FOR ALL, BUT BIGGER REWARDS FOR THE MOST ENTERPRISING AND TALENTED MEMBERS OF COMMUNITY.

EVEN OUR

THE GINI COEFFICIENT HAS SEVERAL DRAWBACKS. A NUMBER OF MEMBERS HAVE POINTED THEM OUT. FIRST, IT 18 AN ACADEMIC ABSTRACTION. SECONDLY, AS GENERALLY USED BY OUR CRITICS, IT IGNORES THE SUBSTANTIAL "TRANSFER INCOMES" CURRENTLY PROVIDED FOR A VERY SIGNIFICANT PART

OUR

OF COMMUNITY, THIRDLY, IT PRESENTS, THEREFORE, A DISTORTED PICTURE OF THE REAL LIVING STANDARDS OF THE FAMILIES CONCERNED.

LET ME BE MORE SPECIFIC. AS EMPLOYED BY OUR CRITICS; THE GINI COEFFICIENT IGNORES THE VERY REAL CONTRIBUTION OF BOTH SUBSIDIZED PUBLIC HOUSING AND OF SOCIAL SECURITY TO RAISING LIVING STANDARDS. IF THESE WERE TAKEN INTO ACCOUNT, THE EXTENT OF INCOME INEQUALITY BE LESS THAN HAS BEEN ALLEGED.

WOULD

OTHER FACTORS MAKE SUCH INDICES CRUDE AT BEST. LET ME GIVE FURTHER

A EXAMPLE. IN LINE WITH THE STRUCTURAL TRANSFORMATION OF THE HONG KONG ECONOMY, THERE HAS BEEN A DISTINCT UPGRADING OF THE OCCUPATION MIX, WITH FASTER PAY INCREASE FOR JOBS IN THE PROFESSIONAL, MANAGERIAL, SUPERVISORY AND TECHNICAL LEVELS, AS AGAINST JOBS REQUIRING LITTLE SKILLS. THIS IS A BENEFICIAL DEVELOPMENT AND INCREASED INCOME DIVERSITY IS PARTLY A CONSEQUENCE OF IT. HENCE, FUNG

MR SHOULD NOT BE SURPRISED IF WAGES GO UP AT DIFFERENT DIFFERENT SECTORS

RATES IN IT WOULD BE WORRYING IF THAT IS NOT THE CASE WOULD BE THAT WE WOULD HAVE AN INFLEXIBLE LABOUR MARKET AND ECONOMY.

THE

IT

/IN ANY