Any burden resulting from measures adopted in the Budget to tackle Hong Kong's economic woes will be shared fairly throughout the community. This was the response by Secretary for Financial Services and the Treasury Frederick Ma Si-hang to my motion in Legco two weeks ago calling on the government not to raise fees and charges that could affect people's livelihood.

Mr Ma has also said that the tax proposals to be announced by Financial Secretary Antony Leung Kam-chung would be guided by the principle of fairness.

By sharing fairly, Mr Ma means that all groups will be affected - the lower and middle income groups, and Comprehensive Social Security Assistance recipients alike. Looking at what the government proposes to do with income taxes - which has been called a reversion to 1997 - one can hardly agree with the administration's definition of fairness.

By reverting to the 1997 tax structure, a wage earner with a monthly income of $16,000 faces a 56 per cent hike in salaries tax, while those earning $25,000 face a 32 per cent increase.

For those earning $30,000, the rise in tax equates to 27 per cent, while those on $51,000 per month or more will be forced to pay the standard salary tax of 15 per cent, which represents a 22 per cent increase in the salaries tax they are paying now. At the upper end of the scale, a high-income earner of $120,000 per month - who has already been paying the standard tax rate - will be unaffected by the proposed change.

While we all agree that the government needs to contain its runaway deficit, resorting to a method which hits the lower and middle-income groups hardest while leaving the high-income earners unaffected, is entirely wrong in its approach. The middle class has already been plagued by salary cuts, with their assets turned into negative equity. By taxing the middle class substantially - and proportionately - more than the higher-income groups, the administration is sorely testing the patience of the middle-income earners. Many in the middle class are already disillusioned with a government for the rich, and by the rich.

In a survey by the Democratic Party in January, the majority of respondents (62 per cent) said they opposed increasing taxes on the middle class specifically to combat the deficit. When asked to rate alternatives to balancing the books, the responses were: increasing the tax on the higher-income groups and corporations (46 per cent), selling government assets and raising asset-backed bonds (26 per cent), cutting government services (7 per cent) and increasing the salaries tax on the middle-income groups (5 per cent).

Fifty-five per cent believed that increasing middle-class salaries taxes would adversely affect economic recovery. In fact, common sense tells us that increasing lower and middle-income taxes will curb their spending, thus shrinking the economy further.

Clearly, the dual impact of cutting government expenditure and increasing taxes in an attempt to address the deficit will only make matters worse. As noted by prominent economists, no government has ever attempted to rejuvenate the economy through tax increases. The special administrative region (SAR) government is perhaps the only government in the world which is attempting to raise taxes at a time of economic depression.

Adding to the burden of the lower and middle classes is the plan to increase tuition fees in universities and upper secondary schools, affecting up to 250,000 students. This proposal comes despite the Tung administration's unwavering commitment to education. Education and health services are two of the few benefits to which the middle class is entitled.

The decision to cut further the already low pay of foreign domestic helpers will possibly heap further burden on the middle class. If the employer wants to ensure quality service from the family helper, then he or she will have to shoulder the proposed levy instead of docking it from the maid's pay.

Furthermore, the plan to increase rates from 5 per cent to 5.5 per cent will affect all property owners. These four proposals added together will make life for a middle-income earner much worse than before.

While we all agree that the public should share the burden in balancing the books, the higher-income groups should bear more.

Instead of making the middle class bear the brunt of the budget cut, the SAR administration should make the profits and salaries taxes slightly more progressive - by increasing the profits tax rate to 17.5 per cent for corporations with an annual profit of $10 million, and raising the standard salaries tax rate to 17 per cent. By selling government assets and issuing bonds to raise money, the government can further raise $50 billion in revenue.

People are growing tired of the administration's apparent inability to lead them through the economic upheaval. Surveys have shown that the satisfaction with the administration has reached its lowest level. Targeting the middle class unjustly in tax increases will only add fuel to the fire, and they are unlikely to take this quietly.

Mr Leung, taxing your taxpayers fairly can be a taxing job. But if you are unable to convince us of your concept of fairness, you will be taxing our patience, at your peril.

YEUNG SUM

Chairman of the Democratic Party and a directly elected Legislative Councillor

[South China Morning Post, March 5, 2003]