MR YIU SI-WING (in Cantonese): Chairman, I rise to speak in support of the amendment to the Inland Revenue (Amendment) (Tax Concessions) Bill 2019 which seeks to increase the tax reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment 2018-2019 from 75% to 100% while retaining the ceiling of $20,000. The tax concession aims at easing the burden on the middle class and small and medium enterprises ("SMEs") to enable them to save expenses for future uncertainties and to stimulate their spending. 

 

As we all know, the recent row has led to a significant downturn in the business of the tourism and retail sectors. While the retail sector has seen a drop in its total sales amount by some 20%, the catering sector has also been hard hit. If there is any tax reduction, the reduced tax bills will, to certain extent, induce some middle-class people to spend more.

 

Having continued for four-odd months, the row arising from the legislative amendment exercise not only has caused a cliff-like drop of business in the tourism sector, but has also left some profound repercussions which are gradually surfacing now. As pointed out by Financial Secretary Paul CHAN, the negative growth of Hong Kong's economy is markedly greater in the third quarter than in the second, implying that the economy has slipped into a technical recession. Apart from the tourism and retail sectors being in a slump, Hong Kong's exports have also been expected to fall by more than 7% in the third quarter, which is the largest quarterly drop in a decade. As Financial Secretary Paul CHAN described, the present blow to Hong Kong's economy is comprehensive, and with the situation showing no sign of abating as yet, the possibility of having negative growth for the whole year cannot be ruled out.

 

The violent incidents triggered by the legislative amendment row have dragged Hong Kong into a political whirlpool, and the attempts to stop violence and curb disorder and to restore order have not yet been successful. During the legislative amendment row, the opposition camp has sought to expand its political spectrum by adding fuel to the fire through different channels. It has not scrupled to spread specious and negative messages about Hong Kong's current situation and demonize issues which are difficult to resolve at the moment, so as to direct all criticisms at the SAR Government and create a false impression that the administration of Hong Kong is in a mess. Meanwhile, in order to disrupt the smooth implementation of "one country, two systems", they have deliberately made sweeping assertions and used various ploys to vilify Mainlanders and Mainland affairs. Actually, as a developing country, the Mainland will naturally experience a situation where certain problems, such as law and order problems, wealth disparity and corruption, inevitably arise in the course of its development. The opposition camp only seeks to exaggerate the shortcomings of the Mainland system and says nothing about the progress in the Mainland, thus stirring up conflicts between the two places. By emphasizing "two systems" and evading "one country", they sow misunderstanding and mistrust towards the Mainland among the general public―the younger generation in particular―making them resist "one country, two systems". This has resulted in the rapid rise of the advocacy of self-determination for Hong Kong and "Hong Kong independence", and incessant violent conflicts.

 

In fact, prior to this movement, the opposition has been impeding Hong Kong's development by way of internal political attrition and this has already become the order of the day. As one can see, frequent filibusters in the Legislative Council and the huge backlog of funding applications in the Finance Committee have affected many sectors. Also, a number of bills are still awaiting scrutiny by the Legislative Council.

 

Chairman, I am explaining why I support the Government's proposal to raise the tax reduction from 75% to 100% for salaries tax, profits tax and tax under personal assessment. Therefore, it is necessary for me to make mention of some background information.

 

The abortion of District Council meetings due to some politically-related ad hoc agenda items shows that the Government encounters increasing difficulties in policy implementation. Despite so, the Government, as I just said, still tries to find ways to alleviate the hardship suffered by the business sector and the middle class. When the present situation arose, the opposition camp laid blame on the Government. Certainly, the Government should not shift all the blame onto the opposition camp. But if you think again, don't you think the opposition camp also has a share of the blame?

 

The "anti-locust" campaign, protests against parallel traders, "Occupy Central" and Mong Kok riot in recent years, as well as the legislative amendment row this time round are all triggered by the opposition camp through its manipulation of the conflicts and grievances which have continuously accumulated. With ongoing political instability, Hong Kong's economy has been caught in a bottleneck, lagging remarkably behind the economies of the Mainland and Macao, and even that of our neighbouring Singapore. While other places are quietly striving for economic development, we are stuck in continuous internal attrition and remain stagnant. This tax reduction measure can only relieve the burden of some people, and actually, when compared to our competing … if the present row can be resolved, the situation will be completely different.

 

Chairman, after the reunification, Hong Kong could have further strengthened its status as an international financial centre and international maritime and aviation hub, given its institutional strengths, the sizeable market of the Motherland, the support of the Central Authorities through various policies beneficial to Hong Kong and the national strategic planning of the Guangdong-Hong Kong-Macao Greater Bay Area which encompasses the successive commencement of various major cross-boundary infrastructure projects, and the Guangzhou-Shenzhen-Hong Kong Express Rail Link ("XRL"), the Hong Kong-Zhuhai-Macao Bridge ("HZMB") and the boundary control point at Liantang/Heung Yuen Wai which enhance our geographic and network advantages in the area. However, the good days did not last long. These few months have been marked with continuous violent protests. Protesters have gone so far as to ruthlessly vandalize public facilities, desecrate the national flag, and deliberately trash some shops. Apparently, they are challenging the authority and credibility of the SAR Government's governance and the bottom line of "one country, two systems". This situation has made the Central Government concerned about whether Hong Kong has gone out of control, and we have begun to see some signs that the Central Government is wavering in its support for Hong Kong. Moreover, endless violent protests have increased the risks of investing in Hong Kong. As we observed, this has already affected the plans of some large corporations to make long-term investment in Hong Kong, and I have also noted that some firms have relocated their headquarters to Singapore. Among the people I know, many have transferred their assets to Singapore because they are worried about the repercussions of the political storm in Hong Kong.

 

In order to fight for their purported democracy and freedom, protesters in this row have shown no hesitation in resorting to violence at the cost of Hong Kong's long-term prosperity. I beg them to have a think: Is it worthwhile to do so? Among the Four Little Dragons in Asia (Korea, Taiwan, Hong Kong and Singapore) in the old days, the economies of Hong Kong and Singapore were relatively small as compared to others in the world and needed to rely on the service sector for market development. In recent years, Singapore has been making rapid development and has gained international recognition in various aspects, such as government's probity, business freedom, infrastructure and social stability. In fact, Hong Kong once ranked top in these aspects, but being beset by political attrition, it is now faced with an uncertain prospect. Taiwan has been practising a democratic system for some time, but still, it experiences severe political attrition and a serious economic downturn which has lasted for years and shown no sign of improvement. This reflects that democracy and freedom are not panaceas for all problems. The primary aspiration of the public is to have a stable political situation and to live a peaceful and contented life. And this is also an important consideration for investors.

 

Chairman, the risk of a global economic downturn is looming, and this has something to do with political disputes. There are two factors of uncertainty which have drawn global attention: first, Brexit, and second, the China-United States trade war.

 

In 2016, Britain decided whether to withdraw from the European Union ("EU") by way of a referendum, thus marking the beginning of a series of political gambles taken by Britain. At that time, many of the voters did not really want Britain to leave EU but simply wished to use their votes to express their discontent about the status quo and the establishment, as well as their quest for a change. Subsequent to the Brexit referendum, a number of problems have actually arisen. For example, the issue of Brexit has become a tool in the struggle for power and interests, throwing the British ruling party, different political parties and groupings, the parliament, the press and media, and the general public into serious confrontation and rifts.

 

Having been a member of EU for years, Britain has expanded its trade and investment with the support of the market access to the huge European market. Also, the access to the financial services market of the European Economic Area has been an important pillar supporting Britain's position as an international financial services centre. Both Britain and EU have a price to pay after Brexit.

 

Currently, Britain has extended the Brexit deadline for the third time. In the face of the uncertainty which has already persisted for three-odd years, British and European enterprises, especially those doing import and export business across the English Channel, can do nothing but to wait and see what will happen. The British Prime Minister has just succeeded in his bid for an early general election in December

 

MR YIU SI-WING (in Cantonese): I am about to make my point. The current state of affairs in Britain has a very direct impact on Hong Kong, because when the British enterprises―and Hong Kong enterprises also―find the current situation in Britain uncertain, they will worry whether the economic prospect of Britain becomes bleak. Given our close relationship with Britain, Hong Kong will inevitably be affected by that. I am just trying to point out this relationship.

 

As regards the China-United States trade war, started by the American President Donald TRUMP, this trade war has been ever-escalating along the way. On the surface, President TRUMP's intention is to use the serious imbalance of trade between China and the United States as the justification for forcing China to further open up its market to reduce the trade deficit of the United States with China. But the truth is that he is making preparations for the next round of electioneering. He actively promotes the America First policies regardless of consequences. He has done barbaric acts in contrary to the spirit of free trade and the core values of capitalism. This trade war can be described as a repeat of the trade war between Japan and the United States in the 1980s, considering the close parallels between China today and Japan back then. With the lesson learnt from the preceding trade war between Japan and the United States, China has long since made preparations to prevent a repeat of the history.

 

In the present China-United States trade war, both countries are losers while economies around the world (including that of Hong Kong) are also affected. The United States has always wanted to obtain more political chips, and this political row has degenerated Hong Kong into a pawn in the hands of the American government during the China-United States trade war.

 

Chairman, the two aforementioned major factors of uncertainty are having an impact on Hong Kong's economy, and Hong Kong has even become a venue for political wrestling. Recently, Hong Kong has been used as a political chip in the president elections in the United States and Taiwan. Their criticism that there is no democracy and freedom in Hong Kong is utterly groundless. They merely used Hong Kong for their own good. Certainly, the opposition camp is willing to be used, but obviously, many Hong Kong people have been misled.

 

As a matter of fact, economic development and social stability go hand in hand. Violent resistance will merely lead to economic recession and disturbance to people's lives. Failure to curb it will trap Hong Kong in an eternal vicious cycle. I hope the Government can stop violence and curb disorder expeditiously, so that Hong Kong can restore its vitality and rebuild its economy as soon as possible.

 

Based on the above analysis, I consider it necessary to increase the reduction in salaries tax, profits tax and tax under personal assessment for the year of assessment 2018-2019 from 75% to 100%. That said, such measure is just like a drop in the ocean, and the key still lies in an expeditious restoration of calmness in Hong Kong.

 

Chairman, I so submit.