22 April 2019
Carrie Lam's main focus is on tax reform, technology development, arts and culture in the run-up to her inauguration as Hong Kong chief executive on July 1. Photo: Reuters
Carrie Lam's main focus is on tax reform, technology development, arts and culture in the run-up to her inauguration as Hong Kong chief executive on July 1. Photo: Reuters

What Carrie Lam has in store for Hong Kong

Carrie Lam is keeping a low profile on the political front as she prepares her government’s agenda with just two weeks left before she takes office.

Lam’s focus is on tax reform, technology development, arts and culture 

That’s good news for Hong Kong people who are tired of the kind politics engendered by Leung Chun-ying’s divisive governance.

Part of it is the notion of Hong Kong independence which Leung has been using to crack down on dissent.

Lam told a media interview that the idea of Hong Kong independence was supported by very few people and has not gained ground as a popular ideology. It’s an attempt to cool social tensions triggered by Leung’s rhetoric.

In the past month, Lam continued to win public support, according to the Public Opinion Program of the University of Hong Kong.

It put her latest support rating at 54.7, her approval rate at 49 percent and disapproval rate at 44 percent, meaning her net popularity has increased from zero two weeks ago to positive 6 percentage points, a record high since she was elected.

Her rating is already much higher than Leung’s but there is still much room for improvement if she gets things done.

One of the key issues Lam needs to deal with is technology development.

Lam said her government will consider providing tax breaks and other incentives to attract technology start-ups. The core problem is that the government has no innovative ideas to welcome any disruptive applications such as ride-hailing service Uber. That has set a very bad impression of Hong Kong as an international haven for start-ups.

In fact, the Hong Kong government has taken a tough stance against Uber. Last month, 22 of its drivers were arrested on suspicion of picking up passengers without a hire-car permit and third-party insurance. So far, more than 10,000 Hong Kong people have signed an online petition to support Uber and urged the government to work with the company.

It could be quite easy for Lam to say that she would do something for the technology sector in order to lure more new start-ups from all over the world, but Lam should acknowledge that the existing legal framework has failed to catch up with the fast changing technology-driven world.

It could be quite unrealistic for her administration to exclude innovative services like Uber from its transport plan.

The government’s unwillingness to adopt ride-hailing services has put Hong Kong behind other Asian economies in terms of technological innovation.

The current debate on Uber is limited to whether the operation is legal or not. But at the root of the Uber issue is the government’s refusal to increase the number of taxi licenses.

It is quite ridiculous that this city of seven million only has 20,000 taxi licenses. The government should break the monopoly of taxi license holders and issue as many licenses as possible to cope with market demand for high-quality car rental services.

The government should admit that Uber is a solution to the excessive number of cars on the road. It can help ease traffic congestion and boost the effectiveness of private car ownership.

Lam needs to be brave to tangle with with vested interests in the taxi industry and pave the way for Uber and the like to enter the market with the ultimate goal of reducing the number of private cars on the road.

Another challenge for Lam is tax reform.

She has been talking about offering special tax arrangements for start-ups and IT companies, as well as reduce the tax burden of small and medium-sized enterprises while maintaining a simple tax regime. But that could result in a decline in government revenue.

Law Chi-kwong, reportedly set to become Lam’s labor and welfare secretary, turned the focus of tax reform to the rich. He said tax reform, including value-added tax, is necessary to help narrow the income gap between the richest and the poorest.

Law said the rich tend to earn money from investments rather than from salaries. His suggestion of levying a value-added tax, taxing mainly incomes from assets and investments, will help redistribute wealth for reallocation to the poor.

Such tax reform could be the solution to bridge the income gap. Carrie Lam, however, will be constrained in adopting the idea under pressure from the business elites.  

In fact, Law’s proposal immediately drew fire from pro-business lawmaker Jeffrey Lam, who said it will hurt the financial industry which contributes 17 percent of Hong Kong’s gross domestic product. Jeffrey Lam said the tax will severely worsen the economy and drive away large corporations.

There is still time for Lam to work on her inauguration speech which should give us a preview of her agenda for the next five years. But judging by the above examples, it could be an uphill battle. 

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EJ Insight writer

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