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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (2033)	12/16/2003 12:16:28 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

A taxing question for Hong Kong By Li Yong Yan BEIJING - It is a generally accepted truth that tax is as unavoidable as death. However, this rule has a glaring exception. Hong Kong has avoided tax for the past 100 years. During the 99 years under British rule, it paid no tax to its colonial masters in London. Since sovereignty reverted to China six years ago, Hong Kong again has managed to keep all of its revenues to itself. Considering that the territory has never been an independent entity, but first a colony then a special administrative region of two respective powerful nations, the feat is nothing short of miraculous. It is also perfectly legal. Article 106 under the Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China specifically says that Hong Kong "shall use its financial revenues exclusively for its own purposes, and they shall not be handed over to the Central People's Government. The Central People's Government shall not levy taxes in Hong Kong." So Hong Kong gets to spend every dollar it collects into its coffers. The legality of this is not in question. The logic, however, is - especially given the fact that Hong Kong is now an integral part of China, a country whose other integral parts are not nearly as prosperous, and yet are expected to remit taxes to the central government. No explanation was ever offered for Article 106. Unlike the case with virtually every other law and regulation that is passed in China, no debate took place; no questions were asked. It is therefore high time to ask why. Compensation for shame. It is true that the Chinese constitution gives some leeway to Hong Kong in recognition of its history. It is also true that the loss of sovereignty over Hong Kong a century ago was an infamy, but this infamy was not so much against the territory itself as against the Qing Court. Neither the present Chinese government nor the people of the mainland owe anything to Hong Kong. If anything, it is Hong Kong that owes a debt of gratitude to the mainland for taking it back from imperialist clutches. In any case, surely the past is past, and should not be atoned for by financial compensation, not by the Chinese at least. Preservation of prosperity. Tax exemption is business-friendly. But this is just as true for the mainland as for Hong Kong. While prosperity means a lot to the well-being of Hong Kong, it means much more to the much less developed inland provinces of China. Taken alone, Hong Kong ranks at the very top of the premier league of economic powers. It has world's third-highest per capita gross domestic product (GDP) - US$24,000 - exceeded only by the United States and Japan, whereas mainland China fails even to make it into the top 100. While Shanghai is arguably one of the most developed cities in mainland China, its per capita GDP of $3,900 is but 16 percent of Hong Kong's. The less fortunate provinces produce only a tiny fraction of Hong Kong's wealth. Guizhou province's 2002 GDP, when calculated on a per capita basis, was $375, or 1.5 percent of Hong Kong's. Yet these brethren are not exempt from the state tax. Gansu province registered a per capita GDP of $500 last year, yet it hands over to the central government about $1 billion in taxes annually. The central government levied more than $141 billion in taxes last year under some 20 different categories, including value-added tax (VAT); taxes on business, property and enterprise/individual income; stamp taxes; vehicle-purchase taxes; and a host of others. And this was accomplished with little regard for the plight of farmers in agricultural provinces. One farmer, unable to scrounge up a few hundred yuan to pay his taxes, ended his life by liquid pesticide. Even the bottle of cheap poison was beyond his means. He borrowed his last drink from the shop-owner. Of course, Hong Kong is not to blame for such tragedies. But it does beg the question: Why is one city's prosperity more important than another province's bare subsistence? This is not a question of sour grapes. Nobody should expect Hong Kong to pay more than statutory rates just because it is prosperous. Equality should prevail over any special administrative fences. Yet the government policy of "one country, two systems" is discriminatory in terms of the burden of taxation. It is discriminatory against its own people in other ways as well. Hong Kong residents are completely free to visit the mainland but it is much more difficult for a mainlander to travel to Hong Kong than it is for a Japanese or an Australian. What is the logic here? Should the mainland people regret that they were not colonized? Stability is all very well, and necessary. But it should not be bought at the expense of justice. Such travel restrictions are a flagrant violation of China's own constitution. Tax reduction and exemption are usually associated with disaster and poverty relief. Tibet is the only other administrative area of China that does not hand over its revenues to the central government. With good reason - it doesn't produce enough even to sustain itself. There are other, political considerations behind the exemption. But nobody wants to argue over Tibet's tax privilege. What is the case for Hong Kong, then? An untold reason for Hong Kong's special treatment lies deeper under the surface: Since Britain refrained from levying taxes on Hong Kong, then the "People's Government" should do the same to prove that socialism is superior to capitalism. Former premier Zhu Rongji pledged full financial support to Hong Kong "in case the Asian financial crisis worsens". But what about the more needy people closer to Beijing? The British didn't suck money away from Hong Kong because it would be plain wrong, and they knew it. If Beijing really is serious about showing London up, it should instead uphold and administer the constitution in a manner that is equal and fair to every Chinese in every city and village. That way, it will win more respect from both foreigners and Hong Kong's residents. For the sake of equality and justice, for the integrity of the supreme law of the land and for an enduring prosperity, it is time for Hong Kong to pay up. (Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.) atimes.com