Friday, February 21, 2014, 08:22
Cheung has a valid point
By Staff Writer

The debate on new property transaction taxes continued in the Legislative Council (LegCo) on Thursday with the focus centering on a number of controversial amendments which the government considers unacceptable.

Secretary for Transport and Housing Anthony Cheung Bing-leung reiterated that the government will not accept an amendment that allows LegCo to review property tax proposals before implementation. He has a valid point because such a procedure will almost certainly create confusion and chaos in the marketplace.

Imagine this. The government proposes a new tax to dampen speculation. While this proposal is debated in LegCo, a process that could take days if not weeks, speculators could be expected to stage a stampede for properties before the tax becomes law. This would further distort supply and demand by unnecessarily pushing up prices.

The government is correct in rejecting the amendment introduced by members representing the business sector who are seeking to secure a bigger say before the introduction of new property taxes. Of course, their demands are not entirely unreasonable. Taxation is a matter for lawmakers. It is their duty to check the government power to tax people.

But the new property taxes were levied not so much to increase government revenue but rather to address a social issue of great concern to the majority of Hong Kong people. These taxes seek to raise transaction costs to discourage rampant speculation on Hong Kong properties by overseas investors, which has resulted in price hikes pushing up the cost of housing to levels fewer Hong Kong people can afford.

Another amendment objected to by the government, which sought to exclude corporations owned by Hong Kong people from the new taxes, was voted down in the LegCo. If passed, that amendment would have created a huge legal loophole that could make a mockery of government efforts to fight excessive speculation in the property market.

The remaining amendments will continue to be debated in LegCo on Friday and Saturday. If things go smoothly and the amendment issues are sorted out, the bill will be tabled for its third and final reading before becoming law.

Meanwhile, the new taxes will continue to come into effect, while an amendment requiring the government to return tax to taxpayers if the bill is overturned in LegCo is scheduled for debate in the coming sessions. This could be a moot point because the bill enjoys wide public support and stands a good chance of passing in LegCo.