Demands for polluter-pay taxation, super-deductions for 'green vehicles'

More taxation experts are calling for sweeping new taxes as well as tax deductions to improve the city's worsening air pollution.

Deloitte proposed the introduction of more polluter-pay taxes and super-deductions for green enterprises and equipment Thursday.

Yvonne Law, the professional services firm's tax partner, said further implementation of the city's polluter-pays principle would be timely, given the long-term need to widen the city's tax base to support an aging population.

"We have a lot of indirect taxes and charges being levied. We thought the low-hanging fruit would be the environmental taxes based on a user-pays principle, because it would be better in principal and easier to be supported," she said.

"Hong Kong is not a welfare state, but with an aging population, this will be a problem in some years later, by the year 2039, one in four (residents) will be 65 and over," she said.

Looking out at a haze-obscured Kowloon just 1,000 meters from the company's Admiralty headquarters, Law proposed extending a 50-cent bag levy beyond supermarkets, beauty and convenience stores to all retail outlets along with indirect taxes on electrical and electronic equipment, beverage containers, batteries, garbage and over packaged goods.

The company also called for consideration of increasing licensing fees and charges for luxury cars with bigger, and thus more polluting, engines.

On the other side, the company also recommended that Financial Secretary John Tsang include a 150-percent super-deduction on operating expenses for businesses which achieve a 45-percent reduction in carbon footprint to be vetted by the Environmental Protection Department.

Law also suggested another 150-percent super-deduction for the purchase of environmentally friendly equipment and cars, a suggestion put forward by the Taxation Institute of Hong Kong Wednesday.

Greenpeace Campaigner Prentice Koo said increases in environmental taxes would absorb looming healthcare costs as the city's population gets older.

A new finding released by the University of Hong Kong Wednesday indicated that poor visibility and air pollution linked to haze were responsible for about 1,200 deaths every year.

Koo, however, expected the budget to be more reactive than proactive, taking into account the chief executive's last budget that focused on mitigating the effects of the global economic downturn.

"Although introducing and developing environmental taxes are our goal, it is likely the government would shy away from this and respond to concerns over inflation by introducing electricity subsidies of some HK$3,500 which will have the unintended effect of encouraging frivolous energy use," he said.

He also suggested the subsidies be offered only to households which used fewer than 200 kilowatt hours a month.

China Daily

(HK Edition 01/21/2011 page1)