Fiddling while Hong Kong pollutes
SCMP November 20, 2006
In January, before the budget, before the publication of the government's
goods and services tax proposal, I proposed in this column the adoption
of an energy tax. It would broaden the tax base, be easy to implement,
be fair to all consumers and economically neutral.
It could also help the environment by cutting greenhouse-gas emissions.
Since that time, the argument for such a tax has increased dramatically.
The GST proposal has been so strongly criticised by almost every political
party that it is effectively dead. And now concern about climate change
has moved to centre stage among global issues. It is likely to be with
us a lot longer.
The mainland is increasingly focused on the damage to the health of
its people being caused by air and water pollution. If for no other
reason, Beijing is likely to agree to play a much larger future role
in controlling emissions, and the search for low-cost alternatives
to fossil fuels.
I am not suggesting that an energy tax would have a major impact on
energy consumption in Hong Kong. But it would be a small contribution
to the wider global issue and send a message that Hong Kong wanted
to move from laggard to leader.
One may argue that Hong Kong does not need new taxes because it is
flush with other revenue, including revived land sales. That is not
the point. Such a tax would obviate the alleged need for a GST to broaden
the tax base. It would produce a reliable revenue stream which could,
depending on other circumstances, be used to finance cuts in other
taxes or increase spending on the aged.
A 30 per cent tax on electricity and gas usage would raise some HK$15
billion a year, or the same as a 3 per cent GST. About 25 per cent
would fall on households, where energy spending is roughly proportionate
to household income.
Most of the burden would be borne by the commercial sector which,
in summer, tends to overdo the air conditioning in offices, malls and
The impact on prices would be reduced if the energy tax were phased
in with a new scheme of control for power companies - one that reduces
their allowable rate of return on capital from 15 per cent to the (still
very generous) 10 per cent or so likely to be set when the current
scheme ends in 2008.
Unfortunately, it is difficult to be optimistic. I have been unable
to elicit any contrary arguments about an energy tax from the government.
It stays quiet, parroting its continued belief in the merits of a GST,
and unable to consider alternatives to what is clearly a failed proposal.
Hong Kong's overpaid bureaucrats have never shown much ability for
original or lateral thinking. The problems this creates are compounded
by the way that ministers, such as Secretary for Environment, Transport
and Works Sarah Liao Sau-tung, appear to be the glove-puppets of vested
What chance is there for an energy tax when Dr Liao makes so little
effort to address pollution issues - other than with words and promises
- as we lag far behind many other Asian cities in reducing urban pollution.
Only last week she was quoted as warning that emission controls could
endanger energy security and raise power costs.
In a classic bit of bureaucracy-speak which doubtless pleased business
interests, Dr Liao said it would take two years to compile information
and a plan on greenhouse-gas emissions. 'We have to make an assessment
first', she said. As though it isn't plainly obvious what is happening
here, and what could be done if the government could be bothered to
force spending on cleaner sources.
If you want to be a leader, chief executive, it is well past time
to be serious about the top global and local issue. A first step: sack
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