Goods and Services Tax
102. Last year I mentioned that
there was to be a study on the implementation of a goods
and services tax (GST).
Suggestions have been made that GST is unfair to
the grass roots because it is regressive.
However, there are also people who support the
introduction of GST on the grounds that it is in line
with the principle of affordability.
In general, wealthy people, who have a greater
capacity to spend, will pay more GST.
I appreciate the
community's concerns over the introduction of GST.
But I would like to emphasise that
will continue to maintain the low and simple tax regime
that underpins our success.
The purpose of the proposed GST is not to
increase the grass roots' tax burden.
The reason for its introduction is to broaden our
tax base so as to secure a steadier source of revenue
and reduce our reliance on more volatile revenues.
As a matter of fact, our salaries tax and profits
tax, which are the major recurrent revenues of the
Government, are paid by a minority of taxpayers and
enterprises, and these taxes are highly sensitive to
The problems arising from our narrow tax base are
abundantly clear. The
International Monetary Fund has also pointed out that
should introduce GST to solve the problem of its
An internal committee set
up by the Government has carried out the GST study.
Our next step is to conduct a public consultation
on this subject. We
will provide further information in the consultation
document that we are drawing up for publication later
this year to give the public a better understanding of
the tax. Overseas
experience shows that it takes about three years from
making a decision to introduce GST to actual
the public will have sufficient time to hold in-depth,
thorough and constructive discussions on this subject.
At this stage, there is no need to jump to a
GST will have far-reaching impacts on our tax regime and
the Government's financial health, we will listen
carefully to the views of the public.