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Letters to the Editor, July 31, 2016

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Dividend tax is not the right way to go

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I refer to Alex Lo’s column (“Li’s remark about increasing tax is a bit rich”, July 16).

Lo said that “rich men like Li [Ka-shing] don’t pay much tax anyway with their billions of dollars in tax-free dividends”. Lawmakers “Long Hair” Leung Kwok-hung and Lee Cheuk-yan, unions, and some student activists have called for a dividend tax, or “rich man’s tax”.

While Lo may be just trying to drum up readership, he entirely misses the point. A dividends tax or a “total income tax” hits everyone who owns shares of listed companies, rich or poor. Yes, poor, because any ­decrease in income from the dividends hits the poor disproportionately to the wealthy.

Thousands of elderly Hongkongers hold blue chip stocks from decades ago. An elderly resident with 4,000 HSBC shares would have got an additional HK$1,300 a month (compared to the Old Age Living Allowance of HK$2,495). A 15 per cent income tax on this would be very significant to that person.

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Furthermore, dividends have been “pre-taxed” in the form of profits tax paid by the company.

Listed companies pay out dividends after they have paid all of their taxes and obligations. If the government takes another income tax on the dividends, then the recipient in ­essence pays taxes twice. Some countries do that, but that doesn’t make it right. For the sake of the elderly and the not-so-well-off, not for the rich, a dividend tax is not the right way to go.

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