Causes Of Inequality In Hong Kong

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The question I will address in this research paper is about the root causes of inequality in Hong Kong as well as how and how effective are the fiscal policy as well as redistributive program in reducing different aspects of existing inequality. Throughout the whole paper, root causes of Hong Kong will be discussed in two aspects: transition of industrial structure of Hong Kong and the problem existing in current taxation system. In addition to the discussion of root causes, the paper will also discuss the way fiscal policy can address inequality as well as how effective are current tax policy and redistributive programs in reducing different aspects of inequality with real cases of Hong Kong indicated. The root causes of inequality in Hong…show more content…
With the negative impact on economy, consumption and production of goods and services has shrunk significantly, especially the investment confidence has decreased sharply, deflation started to show. In addition, companies were bankruptcy, which contributed to high unemployment. Hong Kong government has carried out series of policies to deal with reduction in property price, which eventually increase the land price significantly and make housing unaffordable. People cannot afford to buy their own house, which further contributed to inequality especially the housing policy that imposed by local government is too little and too late for locals. Additionally, since China carried out “Independent Traveling Policy” for mainland citizens, Hong Kong started to become more and more dependent on service industry and tourism where greater inequality exists instead of manufactured industry where less inequality exists compared to service industry. However, the increasing tourism mainly benefits the hotel owners or the property owners. The server at the bottom has limited income(e.g. for waiters, HKD 10780 per month), social welfare as well as fringe benefit provided by the businesses. What’s more, they…show more content…
The government policies don't have enough power to address the existing problems. The Basic Law states that government can only expands its expenditure when they have a budget surplus, however during 1998-1999 and 2004-2005, Hong Kong government had budget deficit and there weren’t many years that Hong Kong government had budget surplus. As the result, government cannot expand their spending on redistributive program or housing policy to alleviate disparities. Secondly, the taxation system is not effective enough in reducing inequality. The tax rate is not progressive enough, which cannot help government to collect revenue and achieve a budget surplus, which according to Basic Law, cannot expands its expenditure. Hence, the redistributive program in Hong Kong is not efficient to solve all the problems, which will be mentioned later in this paper. Except for the causes mentioned above, Hong Kong government’s reaction towards Asian Financial Crisis in 1997 was one of the factors either. Government started to intervene the property market less to make the market operates freely. And the

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