'Give the middle class tax breaks' urges Taxation Institute

Next month's budget should feature higher tax allowances and bigger deductions to make up for the fact the middle class got "nothing" from last week's policy address, the Taxation Institute said yesterday.

The institute, which represents 2,700 taxation professionals, also suggested that Financial Secretary John Tsang Chun-wah should consider reforms to broaden the tax base, including taxing luxury goods and introducing more green levies. The institute has submitted budget suggestions every year since 1980.

Pressure is mounting on Tsang to alleviate pressure on the middle class, a group Chief Executive Leung Chun-ying was accused of neglecting in his policy speech, while promising HK$10 billion in welfare and initiatives for underprivileged groups.

"The middle class has not received any tax incentives recently, so … we suggest that salary tax bands [the blocks of earnings subject to progressively higher tax rates] should be widened from HK$40,000 to HK$50,000," institute president Joseph Yau Yin-kwan said. "It will lower the burden on taxpayers, especially the middle class, while not narrowing our tax base."

The allowance for dependent parents and grandparents should rise HK$2,000, to HK$40,000, for each dependent aged 55 to 59 and HK$4,000, to HK$80,000, for those aged 60 or above, he added. An allowance of HK$100,000 should be introduced for those caring for parents aged 80 or above.

The institute said a survey of professionals and businesspeople in September and October found that 71 per cent of respondents felt the city's tax base was "too narrow", with a tax on luxury goods sales the most popular solution, favoured by 37 per cent. Green taxes, on things such as road traffic and waste disposal, were favoured by 33 per cent.