funding universal pensions in Hong Kong

A member of the government’s Commission on Poverty has suggested a goods and services tax could be used to fund a new public pension scheme, instead of a further tax on payrolls.

The controversial idea was floated by University of Hong Kong academic Dr Law Chi-kwong after a government-commissioned study last week suggested granting every Hongkonger aged over 65 a pension of HK$3,000 per month, with no means test. But Law suggested the plan would be more palatable if only those in greater need were entitled to the subsidy.

The study, by Professor Nelson Chow Wing-sun, a colleague of Law’s …, suggested funding the pension by imposing new taxes of between 1 and 2.5 per cent of workers’ salaries on both employees and employers. ….

But Law said linking a goods and services tax to universal pensions would make the latter more palatable to the public, after former financial secretary Henry Tang Ying-yen was forced to withdraw a plan to introduce the indirect tax amid a public outcry in 2006. ….

“The government would run into a budget deficit even if it did not introduce a universal pension.” he said. “The government would have to raise taxes somehow.”

Law said that if Hong Kong did eventually introduce a universal pension, the government could consider excluding high-income earners from receiving it “so that public resources could be more focused to help the needy”.

Timmy Sung, “Sales tax mooted to fund pension for all“, South China Morning Post (Hong Kong), 25 August 2014.

Introducing a goods and service tax (GST) or – even better – a value-added tax (VAT) in Hong Kong is an idea whose time has come. I fully support Dr Law’s proposal. But I disagree with his idea of


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