Transcript Document
Econ 100 Introduction to Economics Section 3 Group 2 Hong Kong Budget 2006 - 2007 Group members Lam Ah Kuen 053037 Chau Yik Cheung 053035 Tai Chi Fai 053042 Chan Sin Yu 053072 Cheung Mei Lin 053061 Mak Tin Lok 055108 Economic Performance GDP registered a growth of 7.3 % in 2005 Growth rate % 18 16 14 12 10 8 6 4 2 0 (2) (4) (6) (8) Growth rate in HK (1962-2005) 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1965 1962 Year the unemployment rate fell from 8.6 % in mid-2003 to a four-year low of 5.2 %. 8.5 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 Unemployment rate (%) Unemployment rate in HK(1977-2005) Year Government's Commitment Estimates of expenditure: total government expenditure for 2006–07 will be $245.6 billion. Expenditure 16% 32% 14% 18% 20% Education Social Welfare Health Security Infrastructure Funding to help disadvantaged groups would be increased the recurrent by about $100 million. Funding for disadvantaged groups rehabilitation service HK$20 Million HK$27 Million family support home care services HK$20 Million HK$30 Million Comprehensive Child Development Service •An additional funding of about $230 million to strengthen efforts to assist those in need who are capable of working . Funding for people who are capable of working HK$60 Million HK$150 Million the Intensive Employment Assistance Projects employment assistance measures HK$20 Million district-based poverty alleviation work Why Practicing Goods and Services Tax ?? The Reasons are… Our existing public finances’ expenditure is rigid and revenue is unstable Important revenue items: Land premiums and investment income are volatile The problems of narrow tax base The Government need revenue items to offset the volatility of the others How the Government working out the details of GST Follow the principle of maintaining low and simple tax regime Provide tax refunds to visitors and allow importers Propose relief and compensatory measures Reduction of other taxes, The timetable for practicing GST A public consultation will be launched in the middle of this year It will last about nine months A report will be prepared the proposals will be submitted for consideration by the Government of the next term The information of GST of the countries: Australia, Singapore and Canada Country Australia Singapore Canada Started Year of Tax 2000 1994 1991 Tax Rate 10% 5% 7% Any Refunds to Travelers Yes Yes Yes Economic Condition GST Revenue (Year-on-year % change) The old sales tax is unfair, outdated, ineffective, complex, penalize exports and discourage investment. High sales in 1993 and the first quarter 1994. But a dramatic drop 9% in April, 1994. The economy had got a high budget deficit for few years. *Keep a positive increase* *Keep a positive increase* *Keep a positive increase* $ million The Changes in GST Revenue of Australia 35000 30000 25000 20000 15000 10000 5000 0 31257 23854 27389 15644 1998 - 99 1999 - 00 2000 - 01 2001 - 02 2002 - 03 2003 - 04 Year $ million The Changes in GST Revenue of Singapore 4000 3500 3000 2500 2000 1500 1000 500 0 3470 2957 1995 2121 2134 2165 1657 1997 - 98 1998 - 99 1999 - 00 2000 - 01 2001 - 02 2002 - 03 2003 - 04 2004 - 05 Year The Changes in GST Revenue of Canada 35000 29758 $ million 30000 28248 24990 25000 20000 19461 20684 22790 199798 199899 1999 00 28286 24909 15000 10000 5000 0 1996 97 2000 01 Year 2001 02 2002 03 2003 04 2004 05 Disadvantages 1. Sales Tax is an indirect tax (Regressive Tax System). 2. It contrary to the law of equity and the resources allocation. 3. Difficulties in the implementation. 4. No trading relationship between the government and the tax payerNo commitment 5. Although tax base is widening, the procedures is more complexHigher administrative cost. Higher administrative cost in controlling the tax escapers and the legal trading activities. Disadvantages (Cont’d) 6. Decrease the customers’ shopping desiresdamage to the image of ”Shopping Paradise”. Hong Kong is the freest city in the world, it will hit its reputation. 7. It is the not a good way to raise the government income since the people will not willing to shop under a bad economy. 8. Hard to introduce in the street market. 9. Shortage in accountants may appear in the initial stage. 10. Increase in expenditure to the local small companiesthey may closed. 11. Definition of the necessities, is it including newspaper and television? 12. Crowding-Out Effect. Advantages 1. Widen the tax base increase the government income 2. Based on the concept of “ Pay by Yourselves”. 3. Stabilizing the government income contrary to the negative growth rate. 4. The progresses of trading involves the accounting work enhance the accounting industry 5. The local leavers should take their social responsibilities to pay for themselves. 6. According the Singapore case, the introduction of GST brought the negative effect was short-lived. Survey The background of the survey (from Democratic Alliance for the Betterment) The Date: 27/1/06-6/2/06 The means: random in telephone Target: above 18 The number of people: 1405 The number of questions: 13 Questions: Do you agree imposing GST? How to use (tax cuts or others government administrative fee, return the tax collected before, increase investment of capital construction, increase in public welfare) the surplus budget from different class of income? Analysis People's view towards GST Disagree Agree 60% 50% 40% 30% 20% 10% 0% 2005 2006 Family income and their preference of imposing GST Under $10,000 60. 0 $2-30,000 50. 0 Above $40,000 % 40. 0 30. 0 20. 0 10. 0 0. 0 Agree Disagree No Idea The suggestions of how to use the surplus budget from different class of income 45% 40% 35% Under $10,000 $1-20,000 Above $40,000 30% 25% 20% 15% 10% 5% 0% Tax Cuts Return the Tax Invest more in construction Increase in public welfare The end Thank you!!