This memo illustrates some of the early ideas that eventually morphed into happiocracy.
The "millions of extra transactions" and the reference to "make-work" are bloatwork-in-the-making.
The "Consumption Tax on space" is locotax-in-the-making. Taxing "Resource Guzzlers" is the forerunner of happitaxes instead of unhappitaxes.
I am glad to report that Sir Piers did not introduce a sales
tax in Hong Kong.
Oct 17, 1989: "No to a Sales Tax in Hong Kong"
MEMO DATED 17 OCTOBER 1989
FROM: TONY PAYNE
TO: SIR PIERS JACOBS
Dear Piers
I saw the SCMP article about broadening the tax base and I fully understand your reason for wanting this.
But I really do think that a sales tax would be the beginning of the end as far as Hong Kong's growth rate is concerned. It would involve some of Hong Kong's best brains enacting, enforcing, complying with, avoiding, evading, indicting, and appealing it.
Just think of the millions of extra transactions that would have to be book-kept, audited, assessed, taxed and collected.
Just think of the thousands of firms who are not now compelled to use computers but who would be in the future. (I like computers but they should be used voluntarily to increase productivity, not involuntarily to do make-work!).
I am making this personal appeal to you because you have told me yourself how it irritates you when you see people doing simple things in a complex or inefficient way.
This is exactly what a sales tax would be.
There are many easier ways to broaden the tax base than a sales tax including some of the ways that you mentioned to me e.g. a tax on electricity, gas, water; or more tax on motor vehicles which would have the socially redeeming effect of reducing pollution and reducing the risk of a high-rise inferno that fire engines cannot reach.
Another easy way which we also briefly discussed, is a Consumption Tax on space. The rates system and property tax system are already in place. It would be easy to administer and collect an additional tax in the same vein, at virtually no extra cost.
People would of course resist such a suggestion. But frankly does it matter whether people pay more in the form of a broadly-based Space Consumption Tax, or a broadly-based Sales Tax? Either way, they have to pay. What matters is how low Government can keep its expenses. The higher the expenses, the more people will have to pay, regardless of the means.
Consider the opportunistic company that establishes itself in Hong kong for a couple of years trial, just to see how it goes. They budget for rent, staff, utilities, travel and other hefty expenses. They bid up the price of scarce labour, scarce space and other scarce resources, at the expense of existing tax-paying businesses. After a couple of years, they decide to call it quits. But during this period, they have contributed nothing to tax revenues because they didn't make a profit. Why, when they budget for their hefty space cost in the form of rent, shouldn't they budget for a modest space cost in the form of tax?
Or take the case of the numerous companies in Hong Kong who quite legally arrange their affairs so that they pay little or no tax. They too occupy valuable space, and consume limited resources, whilst contributing nothing to the tax base.
A space Consumption Tax - or a Head Tax - or both, would catch these Resource Guzzlers whether they make a profit or not.
Such taxes would also concentrate everybody's attention on minimising the use of scarce resources. They would also yield probably the most stable income conceivable at a very limited cost.
Unfortunately I am going away tomorrow for a couple of months - otherwise I would suggest we have a bite to eat together to mull over these matters.
However I can foresee the sales tax being gently slipped into place by default if there are not enough voices raised against it.
This memo therefore is my modest contribution to what I hope will be a decision that will not point Hong Kong in the direction of masses of make-work!
With best wishes
Yours sincerely
Tony Payne
