A day after the government proposed the introduction of goods and services tax (GST), Financial Secretary Henry Tang at a radio program called for a rational discussion on the introduction of the new tax during the public consultation period.

He, however, made no bones about the fact that it was a highly controversial issue, as there were cases of foreign governments suffering election defeats after the introduction of the new tax.

Meanwhile, another controversy has surfaced as tuition fees and medical fees received by the government and private institutions are subject to GST payments under the new proposal.

Tang yesterday appeared in two live radio programs to explain the new tax proposal and listened to calls from the audience.

At the start, he pointed out that the tax base in Hong Kong was very narrow and hence the need for broadening the tax base.

He also said it was the right time for discussion on the new tax because economy was robust, inflation was mild and the jobless rate was low.

As a far-sighted and responsible government, it cannot ignore the matter just because the people disliked it.

He said: "The consultation period has just begun... We hope society will have a rational, in-depth discussion on this. So it is necessary to read and digest the consultation paper before making a sensible choice."

Tang further said every taxation system must be fair, while the better-off people should pay more tax.

When a citizen fulfills his duty in paying his fair share of tax, he will be able to enjoy the medical, welfare and infrastructure services.

In reply to the citizens asking for tax exemption from basic necessities such as medical services, he said it would be difficult to grant too many exemptions. "It is easy to talk about basic necessities, yet it is very difficult to define them. When we talk about buying rice, there are many different kinds of rice," he said.

Meanwhile, under the new tax proposal, schools and hospitals which achieve an annual business turnover of HK$5 million will be required to collect the GST for the government.

Secretary for Financial Services and the Treasury Frederick Ma conceded this was a controversial move. However, the Education and Manpower Bureau has not made any comment other than saying that citizens can express their suggestions.

"A subsidized school which has a turnover in excess of HK$5 million may question why another subsidized school with a turnover below HK$5 million need not collect the GST," Ma said during another phone-in program.

"We have envisaged such arguments and that's why we are seeking people's views during the public consultation period."

(China Daily HK Edition July 20, 2006)