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Introduction:
More than 120 countries have imposed Goods and Services Tax, the only developed country that has not imposed this tax is Hong Kong.
VAT or GST has been introduced by France in 1954 (Ministry of
Economy, Finance and Industry).
All the developed countries (except Hong Kong) and most of the developing countries have followed France in imposing VAT/GST because this tax is considered:
Fair: VAT/GST is considered a fair tax because it relates the amount of collected tax to the amount of consumption; the more you consume, the more you pay VAT.
Simplicity: unlike any other taxes, VAT/GST is considered a straightforward tax; it is imposed according to a known percentage on the value of the products and services
Efficiency: this tax is very efficient, it is very easy to collect it and it is very difficult to avoid it.
Chapter2: Objectives:
The purpose of this research is to find out whether VAT/GST is a suitable tax for Hong Kong or not.
The research has covered very large material and literature about Hong Kong and similar economies to Hong Kong such as Singapore.
The research also aimed to show that most of the governments of the world are broadening their budgets by imposing VAT/GST on customers while they are trying to reduce income and corporate taxes.
Chapter3: Literature consulted:
The research has covered a large part of literature published by global accredited organizations such as Price Waterhouse coopers, Ernest Young and the government of Hong Kong.
The major text books have been used to give us a broad idea about the issue in research while the specialized working papers, Internet articles and government websites have been used in order to give us a clear idea about the issue in research.
The research consulted working papers published by several universities and bodies in order to explain the theoretical principles behind imposing VAT/GST (Hubbard,G,R(1997)and the impact of VAT/GST on the informal sector in developed countries.
Chapter4: Proposed Methodology:
We can see
from the above chart the deficit that have faced Hong Kong from
1997 until 2003, the revenue was very low compared to the spending
which proved to be steady.
"During the same year, about 70% of the total revenue collected by the Inland Revenue Department came from profits tax and salaries tax. Nevertheless, the profits and salaries tax nets are very narrow and shrinking. Less than 40% of our workforce of 3.2 million people pay any salaries tax, and only 10,000 people pay the maximum salaries tax rate of 15%. About 5% of the payers of profits tax contribute to 80% of the profits tax revenue. Further loss of profits could occur as a result of globalisation. Besides, the spread of e-commerce will have implications on all governments' abilities to assess and collect business-related taxes. In this regard, both the Financial Secretary and the Secretary for the Treasury expressed their concerns on the impact of the exponential growth of e-commerce on Hong Kong's territorial-based tax system. The Government will set up a Task Force to review public finances and an independent committee on new broad-based taxes", Wong, J(no date given)
The research has depended on major questionnaire that have been
distributed to citizens and companies in Hong Kong in order
to get their opinion about VAT/GST tax. The response that I
have got from this questionnaire has been used in predicting
the change in consumption behavior by the citizens of Hong Kong.
The research has also depended on comparative analysis in order
to see how Hong Kong economy will be affected and how the whole
tax system will be redesigned.
The research depended on some graphs to illustrate the topic further.
Chapter5: Data and Information needs and sources:
This research needs theortical as well as practical data and comparative analysis.
This research is different because it assesses the potential of something that might happen in the future.
The researcher has conducted a questionnaire in order to measure the acceptance of the people to VAT and their views about the fiscal position of their country.
The researcher tried to make sure that the sample is random,
so the results are random too and not biased.
The research also dependeds on comparative analysis in order
to see what happened to similar economies that have implemented
VAT/GST.
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