Govt takes multi-pronged approach to tackle inflation
Updated: 2011-02-24 07:01
By Joseph Li(HK Edition)
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Financial Secretary John Tsang announced a series of one-off and recurrent measures in Wednesday's budget to help people cope with the city's rising inflationary pressure.
With the relief measures costing close to HK$20 billion, the government has chosen a multi-pronged approach. Measures include: the waiving of rates and public housing rents, electricity subsidies, extra allowances for the poor, aged and disabled - as well as an increase of tax allowances for dependent parents, grandparents and children.
Tsang also earmarked HK$24 million for the injection of HK$6,000 into each of the more than 3 million Mandatory Provident Fund (MPF) accounts in the city. However, he declined to offer a tax rebate to taxpayers as in each of the past three years.
According to academics and accountants that China Daily spoke to, the financial secretary responded to voices from across various sectors in his budget. But they felt his efforts were ineffectual. Meanwhile, representatives from political parties felt disappointed or had reservations about the budget, citing inadequate efforts to improve people's livelihood and tackle inflation.
A top government source said that the decision not to offer a tax rebate this year was the right one. "As long as there is inflation, a tax rebate is out of the question, knowing it will push inflation way up," he said, warning that inflation will surge to 4.5 percent this year.
Nelson Chow, the chair of the social work department at the University of Hong Kong, said the government was under pressure to do something with its HK$71 billion surplus. But the financial secretary has done very little to combat inflation except HK$100 million to extend the food bank scheme. Besides calling for more food supply channels, Chow suggested the government start subsidizing public transport companies to offset fare increases.
Wong Hung, an associate professor of social work at the Chinese University of Hong Kong, commented that people would only get back their MPF contributions when they retire. "People in poverty are more practical-minded and want instant assistance," he said.
PWC tax partner Marcellus Wong said that Tsang tried to heed the voices of various sectors, but ended up with only patchy efforts for each of the sectors. In his view, the failure to offer tax rebates is likely to make the middle class grumble.
"Previous rebates showed that they would not necessarily stimulate inflation. And given that there is a rebate exercise - with a ceiling of HK$6,000 per person - the whole exercise would cost less than HK$5 billion," Wong added.
The budget was not wildly popular with legislators either. The Democratic Party called the government a "caretaker government" with a huge surplus that only made half-hearted attempts to help the disadvantaged, the middle class, as well as resolve the wage gap problem.
The Democratic Alliance for the Betterment and Progress of Hong Kong, the Hong Kong Federation of Trade Unions, and the Liberal Party said there were inadequate efforts to help the grassroots to tackle inflation. They said that only those with the means could buy the new inflation-linked bond (iBond).
Finally, accounting constituency lawmaker Paul Chan said the budget was the work of a "lame duck" government, which had declined to do more in tackling long-term issues such as retirement protection.
China Daily
(HK Edition 02/24/2011 page1)