Paradox at heart of HK's reinvention

Land premiums – which developers pay for land use – as home prices tumbled nearly 30 per cent.

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FROM B1 land premiums – which developers pay for land use – as home prices tumbled nearly 30 per cent. Land sales have traditionally been a main source of income for the government, contributing more than 20 per cent to coffers, a figure that has now slipped to around 5 per cent. The government has run a deficit in all but one of the last six financial years, and while it has said it will return the operating account to surplus by 2026, this target appears doubtful given the unknowns of the global economy.

With spending needs rising, including care for growing ranks of seniors, the solution cannot just be what the administration has done: cutting 10,000 civil service jobs and undertaking broader austerity measures that will see a cumulative 7 per cent reduction in public expenditure until fiscal year 2028.

Close watchers of the city's economy, like Hong Kong-based Singaporean academic Donald Low, have said the city needs to rethink its revenue system, not just cut costs. This is not to say the administration must immediately implement tax measures like a goods and services tax or wealth tax that Mr Low and others have advocated.

The last time a goods and services tax was mooted, in 2006 during the tenure of Chief Executive Donald Tsang, the government caved in to public pressure and shelved the plan. None of his successors has broached the idea since.