HK Petrol Supply should be treated the same as Electricity/Gas 20231128

There is one thing that Hong Kong reigns supreme on global league tables – besides its high academic IB scores or long life expectancy – the city is the world’s most expensive place to buy petrol:

Figure 1: not the right reason to be named world #1?

So just how expensive is the cost of petrol to the citizens living here, and is there something that should be done about this exorbitant cost? Below we delve into the wonderful world of high land costs, oligopolies, and misdirected net zero policies to unravel this unfair set up that is likely hampering business and living costs for all Hongkongers.

 

Disadvantaging business vs competitors

Naturally when comparing competitiveness with other jurisdictions, we turn to fellow small open economies such as Singapore and Switzerland, while also benchmarking two larger countries for added context. In this exercise we have chosen Japan (for Asia comparison) and USA (for global context):

Chart 1: absolute petrol prices – HK is head and shoulders above rest of world…

Chart 2: we pay almost 3x as much as the average US driver

According to Bloomberg/globalpetrolprices.com data, it is eyewatering how expensive Hong Kong’s petrol cost (U$3.09/litre in Oct 23) is compared to Singapore which comes in at U$2/litre, while Japan sits almost 40% lower than Singapore still at $1.21/litre. But US really rules the roost, where costs are another 12% lower at only U$1.07/litre (Chart 1). To put everything in the context of relative premium to US prices, Singapore is already at a high 92% premium, but Hong Kong for reasons we will look into below, doubles that, coming at a whopping 189% premium (Chart 2) – what is disconcerting is how the HK premium has been very steadily ranging from 150-200% since much of the past 10 years!

Petrol overpriced against premium office rent AND per capita GDP

Is this expensive fuel cost a function of Hong Kong’s high productivity or expensive land costs? Sadly not. When plotted against Grade A office rents of various top financial centres, HK really stands out in how costly its petrol is – to return to the regression norm, the price of petrol needs to plunge some 25% as a minimum:

Chart 3: HK’s high petrol costs not justified even factoring in its expensive office rents (as a cost proxy for businesses)

Maybe Hong Kong’s expensive real estate is a reflection of its underlying economic productivity? So we plotted the petrol costs against per capita GDP also – here the trend shows much tighter clustering around the regression line:

Chart 4: petrol costs unjustifiably high in context of our economic output

Except Hong Kong that is… Being a true outlier, our petrol prices needs to be cut an even bigger magnitude of 45% to be near the global trend line!

A double whammy of govt & big oil plundering?

To properly analyse the phenomenon of high prices, we first look at whether Hong Kong is buying more expensive international oils:

Chart 5: Import price seems to be relatively stable compared to average Brent price (and rightfully so)

It seems the spread of imported petrol over Brent price has been quite stable even though the premium does vary from teens to high 30%s in the period we looked at above. As a result, Brent oil price can be a useful approximation to the cost of gasoline for imports into Hong Kong (in the absence of dedicated granular data series thereon).

Breaking out the retail prices into its key components, we can see once more how much the consumer is being disadvantaged compared to other countries – whilst the American driver pays only 42% of hiss pump cost to the oil company and government (the rest being cost of the underlying oil), Hong Kong drivers fork out 81% in the pump price to government and oil company (Chart 7), a truly exorbitant magnitude indeed:

Chart 6: Breakdown of pump price – HK is shockingly high on tax and fees

Chart 7: The same components in % terms – HK consumers pay dearly above underlying costs

Here HK in absolute terms are even more jaw dropping – but what surprises us most is how large the profit element is that the oil company makes, after the government already takes the biggest tax chunk out of all comparable markets already (Chart 6).

But has it always been like this, or is it something that happened recently? Looking at the past 18 years, the government levy has not moved (despite being one of the highest in the world all that time!), but it is the major spike in oil company profits that has hiked costs to the consumer:

Chart 8: Pump price – the biggest rise were in oil company margins over the past 2 decades

If we indexed the oil company margins against HK property prices it actually came in lower than home prices in the same comparison period, but something funny happened in 2018-9 period to the cost of petrol station land costs (blue line), which rose much much more (perhaps due to a combination of new entrants and the government suspension of new station tenders):

Chart 9: Comparing price of petrol filling stations; margins, and home prices

But in any case, the significant surge in recent years in oil company margins (now well above inflation index) bodes ill for consumer affordability.

Not only was the arbitrary cessation of petrol station roll out harmful to competition, as the number of cars will not stop rising as the economy and population grows in the longer term, the wishful thinking that everything can go from carbon based fuel to electric from now on (which was the basis of ending new petrol station tendering) is both unrealistic and counter-productive:

Chart 10: how likely can HK go from 85% carbon fuel to zero in 20 years?

The outright plunge by global bureaucrats towards their utopian of zero carbon targets by 2030s will create endless suffering to the people over whom they govern – a glance at the blue areas above shows how overwhelmingly dominant the global economy and people’s livelihoods are powered today by carbon sourced energy.

To impose a planned economy style hard target over the citizenry and deprive them of essential energy (red arrow) will surely return civilisation back to the stone ages – in other words, the impossibility to come up with a substitute energy capacity in such a short span of time (represented by the vertical orange arrow) means the global population, if all following this mad course of action, will be deprived of 85% of their current energy needs…

In view of the above, the HK govt should rapidly reverse its policy and start issuing new petrol station sites without delay – or consumers will continue to suffer.

A new model for petrol station licencing?

Back to the question of affordable fuel for the end user – the traditional way the HK government tenders out station sites has been on a land sale mentality – that is, with a view to selling the site areas to fetch the highest land revenue for the government and not with a purpose of creating a sustainable after market for the masses.

However, if we view petrol as an essential part of people’s daily needs, much like telephone and electricity then why should we not tender petrol stations on a different formula? Whereas the telephone exchanges and electric substations are pretty much given away for free, we submit that petrol stations should also be tendered out based on minimising future fuel costs.

The objective of controlling electricity costs is achieved by the Scheme of Control framework, which is based on return on capital invested. What we should do on petrol stations perhaps, is to have the oil companies bid for each station where the winner of the site is the one that promises the lowest price margins over the prevailing oil price at the time? Not only is this simple formula easy to monitor from an ongoing basis, it introduces a mechanism to drive down long term fuel costs and every economic sector of the society will benefit, rather than just the government’s one off land sale income. Which would you rather trust to keep the spoils from reduced oil company profits – the government or the people? The answer should be beyond dispute…

 

The author would like to thank Chan Hei Lui Kiandra from The University of Science and Technology majoring in Quantitative Finance for assisting in data collection and analysis of this article.

A Brief History of HK’s Building Names 20231108

In a flash of curiosity, your correspondent developed an urge to look back into Hong Kong’s history through how the city has named its buildings over the past 70 years, and the handy tool with which to undertake this flight of fancy is none other than “Names of Buildings”, a regularly updated report published by the Rating and Valuations Department (RVD).

The analysis focused on the residential and commercial buildings of the private sector only¹, covering some 12,000 structures. Since all buildings completed before 1945 were not identified by their years of completion, we will just put them under the “Pre1950s” group for our analysis. Also worth noting is that since we are still early in the 2020s, this category will have much smaller sample population than other decades:

Chart 1: by decade of completion, 1970s was the peak of Hong Kong, constructions

It is clear from above that the 1970s was the height of Hong Kong’s population growth, with 3,165 completions, followed by the 80s (3,070), just these two decades constituted around 50% of all buildings constructed in the territory.

Let’s now delve into the wondrous world of names used to describe these thousands of structures:

Chart 2, Most buildings have bilingual names, very few were purely known in Chinese, even in the early years

It is interesting to note that a substantial portion of buildings (38%) had only English names on the register in the pre-1950s era! This phenomenon receded in the subsequent decades but is now making a comeback with the 2020s now seeing 1/5 buildings with English only names again – is it increased education standards of the population, or is it more residential sale marketing gimmicks?

Below, your correspondent has generated word clouds of descriptions of building names to better visualize what dominated each era².

Transliteration very common in the pre-50s

The early days of Hong Kong, it was common to have names that identified with the property per se, with no need to call it a building or a house, such as: Westcrag, Bethanie. The other very popular way to describe a building is use straight Chinese transliteration of the description of the structure, where Yuen means Garden, and Tong means Hall, while Wan means Bay, for example – these are all prevalent names of the time:

Chart 3, Pre-1950s buildings – no description is good description

Functional 50s – all residential

After the defeat of the Nationalists in the mainland in late 1940s, there was a wave of immigrants coming to Hong Kong which drove a massive need for new residential housing to accommodate the new arrivals. This explains the dominance of residential themed building descriptions as shown here:

Chart 4, The 1950s focused mainly on residential building

1960s saw emergence of HK’s industrial base

The continued high growth in population, coupled with the government initiative to clear out the squatter housing by hill sides meant the 1960s continuing the trend started a decade before – more residential buildings:

Chart 5, Continued dominance of the most common descriptions in the 1960s

But as Hong Kong started to grow and take on a manufacturing role, we started to see industrial themed descriptions come to prominence (factory) and commercial buildings related to overseas visitors (hotel) also came to the fore. In fact, the export weighting of GDP rose from 30%s in the 60s to over 50% in the next two decades, until service sector took off from the 1980s onwards:

Chart 6, Share of Exports reached a high in the 60s

Large estates becoming common in 1970s

The most common descriptions of the last two decades continued to dominate in the 1970s – Building, Mansion, House remained the top 3 monikers, but a new trend started emerging – the popularizing of larger housing estates, as seen in the names Centre, Tower, and City during this period:

Chart 7, Most common description of building name in Hong Kong,1970s

Godown and Factory also rose to the top, suggesting the popularity of industrial and import/export related buildings were increasing, and pointing to the strong rise in HK’s manufacturing prowess in the 70s. But this decade will also be remembered as the peak of the long reign of the term ‘Building’, when it was used in at least 3x as many buildings as the next popular construction description:

Chart 8, ‘Building’ was the most popular description in building names, during 1960-80s

Emergence of lifestyle names in the 1980s

Perhaps due to more large estates being built, the frequency of the description ‘House’ fell in prominence in the 1980s. Also interesting, although not seen in the word cloud below is the emergence of lifestyle related words such as Chalet, Ridge, Beach, Castle, Lookout, Walk, Cliff, Grove, Cove, Monte, Summit… largely of the holiday and nature variety in their aspirations.

Chart 9, Most common description of building name in Hong Kong, 1980s

Interesting enough, some of the transliteration type descriptions popular from the pre-1950s era were still being used, such as Yuen, Lau, Chuen, Tsuen, Tong, although the last three did no appear in the word cloud above.

Big is beautiful in the 1990s

As large estates and mega commercial complexes became the new favourite type of construction projects, coupled with big developers celebrating the peak of the property bubble in early/mid 1990s that accompanied Hong Kong’s brimming economic/cultural confidence and conspicuous consumption, it is no surprise that the term Centre became the top description in building names:

Chart 10, large estate descriptions rose in prominence in 1990s

Other descriptions associated with large projects were also more commonly seen, such as Plaza, Square, and City. Another factor that helped the theme could be the strong last burst in population growth in the 90s, providing the needed fuel in demand as well as strong price gains:

Chart 11, 1990s saw the last strong burst in immigration and thus population growth in HK

Necessity – the mother of all creativity in the 2000s

The Asian Financial Crisis and the subsequent long property crash in Hong Kong might have been the needed trigger to get developers working hard on both quality and ingenuity in naming their products – we saw some very exciting trends emerging in this period in how projects were named:

‘No Description’ returns – that is, projects not ending in a description such as building or house, but boldly go by names alone, eg. Oscar by the Sea, Noah’s Ark, Aqua Blue, Elements;

Numbers as descriptions, such as SOHO 88, 99 Hennessy, One Silversea;

Definite articles (The/ La/ Le) everywhere, and in their own sub genres! Here are some quick categories of interest:

·        Paradise islands – The Capri, The Aegean, The Giverny, and The Monet!

·        All that glitter – The Spectacle, The Sparkle, The Cullinan!

·        Top of the world – The Top, The Zenith, The Dynasty, The Centrium!

·        The bizarre – The Loop, The Celebrity, The Masterpiece!

·        The exotic - La Maison Du Nord, Le Bleu Deux (after Le Bleu … naturally!)

Chart 12, the 2000s saw a burst of creativity in building nomenclature

Privileged upbringing brings bold new names – the 2010s

The ‘No Description’ category remains at the top in building names, but WHAT ON EARTH is Double Cove Starview Prime? Other themed names that stand out include those aspiring to exclusive new world destinations, such as: St. Moritz, St. Barts, Gramercy, Malibu. There were even musical themed names as well: Diva, Solo, Aria, Harmony, Crescendo (not in word cloud):

Chart 13: more wacky creativity in the 2010s

Other interesting observations for the 2010s include: continued Latin invasion, such as La Splendeur, Le Prestige; and even more numbers with 2gether, K11, W668, CORE45, etc.

We surmise that these very diverse and interesting new names were perhaps brought on by a new generation of developer scions heading up their family empires, having born with silver spoons and sent to exclusive top universities for education, are full and proper integrated into the world’s best culture and lifestyles had to offer.

Short but good start to the 2020s

We decided to add a 2020s category as well, even though we are only 3 years into the new decade. As such, trends are still emerging, but we continue to see strengthening of trends started in the 2010s: more use of numbers – such as 99 Commons, LP6; and still wackier names in the ‘No Description’ category – including Sugar+ , Sea to Sky, K-Farm, W Mega, and even OMA OMA!

Chart 14, no-description and numbers continue to be the dominant theme in 2020s so far

Looking back, our review of the trends and fashions that shaped how Hong Kong named its buildings shows how the city’s economy constantly transformed, and how we went from small and functional to large and high density, from confident world beater to more nuanced cultural depths… surely the coming years will reveal to us what the world has in hold for us all.

¹ Private sector here means buildings excluding government subsidised flats (PRH & HOS), government and public venues, hospitals and homes, fire and police stations, as well as charities, religious and cultural premises.

² Each building description includes its plural form (e.g. ‘Villa’ includes also ‘Villas’), and ‘8888’ is used to label buildings that have numbers in their names (1, 2, One etc.).

The author would like to thank Lam Chin Ming Matthew from The Chinese University of Hong Kong majoring in Quantitative Finance and Risk Management Science for assisting in data collection, analysis, and drafting of this article.

【理財新世代】香港樓市及地產股板塊前景 20230923

2023年9月23日

主題:

》目前影響香港樓價下跌的主要因素是甚麼？香港樓價已經尋底？還是尚有一段距離？當中最關鍵因素及指標是甚麼？


》香港樓市向來具投資價值，但現在安安全全做定期，平均息率約4厘，如以此作指標，樓價再跌多少，才具投資價值？預計今明兩年樓價如何？


》經常說地皮是麵粉價，樓價就是麵包價，啟德地皮創9年來的底位，會否已經預示麵包價也會受壓？還是有其他考慮因素？


》最近唐英年及梁錦松都建議政府在10月份公布的施政報告中，應該就樓市「減辣」，放寬措施，不過都係針對豪宅盤。你認為究竟香港目前樓市或經濟狀況，有冇「減辣」的空間及可能性？「減辣」係咪真係有助穩定樓市？如果係，要放寬咩先有幫助？ 香港地產股前景如何？


》樓市無起色，地產股自然也無起色，投資前景是如何？還是已經跌夠？


報導來源：香港電台【理財新世代】
https://www.rthk.hk/tv/dtt31/programme/investmentera_tv/episode/899962


特此鳴謝


主持: 黃瑋傑、徐家健


攝影及剪接: 香港電台公共事務組

擴闊稅基？ 公言差矣！20230919

本文亦於2023年9月19日在【信報】刊登: 擴闊稅基？ 公言差矣！

鑒於最近有關香港財政赤字的報導，各方「權威」再次爭先恐後（包括從未參與任何牟利實業的國際貨幣基金組織），合唱一曲陳腔濫調，主張香港應該改變徵稅結構來「擴闊稅基」、「減低收入波幅」云云，甚至連特區政府也被大合奏催眠，開始自行探索這個對於本港競爭力絕不適合的選項。以「超級聯繫人」（港府自己的口號！）自居的開放經濟體，生存全賴大開中門，以便利人才、貨物、資本和思想能最快速，最低成本去交流，擴闊稅基是否有倒行逆施之嫌？

圖一：特首敬請拒絕誘惑以保持低稅及守護本港優勢

為明確闡述窄稅基的優點，筆者列舉幾個相關地區（包括新加坡和瑞士作為小型開放經濟體代表，再加港人熟悉的澳洲和英國來代表傳統大型經合體成員）以比較關鍵稅收類別中徵收稅項的名目數量。顯而易見，徵收的稅款類別越少，經濟增長就越高，反之亦然：

表一：稅賦越輕，創富越多？

筆者繼而將以上各國稅收整合歸類，再分組以總收入的比例形式呈現。現且將分組之邏輯解釋一下:

甲）對國民的經濟活動直接課稅——即薪俸、利得和資本增值稅；

乙）對以下非尋利活動間接徵收的稅項：

        一）勞工交易稅（如資方所付之工資稅、版稅）；

        二）物業交易／持有稅（主要是印花稅和差餉）；

        三）消費類稅（即商品服務稅、增值稅，及車輛和保險稅等）；

        四）傳統的社會工程稅費（所謂「罪惡」稅，如博彩、酒精、煙草稅）；

        五）新社會工程稅（近年因政治正確和共產思潮而推出的新收費，就如氣候變化稅、碳信                   用額）；

        六）跨境活動衍生的關稅（除了傳統的貨物關稅外，亦加入機場／離境稅：即對人流出入                   境所收的關稅）。

如何設計稅制以促進經濟體的競爭力和活力應是每個政府專注的課題，而在不同稅項類別如何取得平衡來達至以上目標更是至關重要。下文將就此範疇探討之。

自由開放經濟體　較少徵賦收入稅

下列各圖表中最突出的，當是賣地收入在香港和新加坡政府財政上的舉足輕重（【圖一】【圖二】中深紅區域），當然，兩城皆為全球樓價最昂貴之列，賣地收入自然豐厚過人。

此外，香港簡單且低稅制度的優勢亦是顯而易見——其於四大稅收類別的收入為零或接近零，必然有助減少商業活動的阻力，亦令稅務行政成本較其他國家大大減低。新加坡稅制的簡單度稍遜，但仍有一個接近零收入的類別（即新社會工程組，見橙色區域）。

最後，這兩個亞洲金融中心都徵收甚低的直接稅（包括本港之薪俸稅及利得稅，以下由「收入稅」統稱之）：香港為49%，新加坡更低，為42%（深藍區域），可見兩地皆較他國更獎勵勞動文化和企業精神。

圖二：香港政府收入—直接稅收低  

圖三：新加坡的消費稅有助減輕其他稅收負擔

在另一個極端，英國政府從收入中扣除的比例更高（66％的稅收來自收入稅，【圖五】），為本研究各地區中最高；在納稅人口袋剩下的餘錢，英國政府再以消費稅形式沒收另一大份（因此，其消費稅收佔總收入達19.8％，大大超越澳州的11.1％，見【圖四】淺綠區域）。除了從收入和消費徵取更高的稅收之外，英國還有一個第一，就是以稅項類別來計，該國名目最多，結果當然令普通工薪納稅人叫苦連天：

圖四：澳州稅務收入比例

圖五：英國稅務收入比例

諷刺的是，支持「擴大稅基」的人實質就是主張香港邁向稅制複雜化，及名目多樣化，最終市民難逃高稅命運。

香港應否取消直接稅種，改徵消費稅？

美國在1913年通過第十六修正案之前並沒有收入稅，此前，美國憲法第一條第九節第四項明確禁止直接徵稅。這一規定在憲法的第一條已列明，足見建國元勳如何重視人民賺取及保留自己財富的自由，不欲被政府侵犯。

香港的經濟結構也許能受惠於廢除收入稅，因為憑藉其龐大的貿易和再出口流量，已可實現巨額的關稅或銷售稅收入，從而避免搶走工薪階層或盈利企業的勞動成果。

從收入稅轉向銷售稅的另一個優點是相對於波動性較大的稅種（如賣地收入、甚至薪俸稅和利得稅），銷售稅是一項更穩定的收入來源。

理論上，如果僅以10%的稅率向總私人消費支出的80%份額徵稅，就已經能夠產生1877億港元的收入（表二）：

表二：不同稅率情景下的銷售稅收金額

表三：以14%的稅率加諸80%的消費總額已可徵得多於薪俸稅和利得稅總和（100%）的收入

換言之，如果香港明天轉而向80%的私人消費支出徵收13.5%的銷售稅，就足以取代2021/2年度庫房收取的所有收入稅！

舊文重溫：稅賦輕則經濟興！

筆者早前對美國各州稅收組成的研究中，得出一個明顯結論，就是重銷售稅輕收入稅令國民保留更多財富，從而促進經濟增長；同時，優待個人甚於企業亦能增進繁榮（該研究可於此查看：英文：網頁、博客、領英、臉書；中文：網頁、博客、領英、臉書）。

將上文中五個稅制區域納入這個美國稅務分析框架，並在相同的兩個指標軸上繪製出來：

1. 銷售稅比重減所得稅比重（X軸）——較高的數值代表對消費而非儲蓄進行徵稅，從而鼓勵長期投資；和
2. 所得稅比重減企業稅比重（Y軸）——較低的數值表示企業板塊蓬勃旺盛，或個人稅務待遇不亞於影響力龐大的巨企。

結果甚有啟示。在目前的稅收組合下，香港和新加坡的定位（接近紅色的州份）比瑞士、澳洲和英國利民，因為後者與高稅／親大企業的洲分更為接近（即【圖六】中紫色州份）：

圖六：香港和新加坡較低的入息稅更能促進經濟活力

如果按上文提議，將香港的所有收入稅都以銷售稅替代，那麼香港的地位將會大幅提升，成為研究範圍中與X軸最扁「好」的地域（即【圖七】中右手邊紅色菱形），使新加坡相形見絀。

圖七：通過用銷售稅取代收入稅，香港的稅務吸引力將超越所有美國州份（Y軸將不再有意義，因0減0仍為0）

本文建議的改革，可令香港在全球收取銷售稅的一百三十多個地域中，在「銷售稅—所得稅」頻譜上遙遙領前。通過廢除入息稅和利得稅，香港的競爭力和吸引力都將無與倫比，令全球企業和高收入人才中趨之若鶩，更勿論在眾多先進經濟體中芸芸稅務難民：因在此等國度富裕被視為原罪，甚至人民在海外的收入都難逃魔掌。

此外，廢除收入稅不僅便利營商、創業、致富，還大幅減少了伴隨龐大稅收官僚機構而來的行政負擔及運作成本，同時保障了公民的隱私（再無須聲明收入為何、如何及何時賺取的），香港由此可以真正成為環球自由和商業的明燈。

特首和財爺應該無視那些大聲叫囂「擴大稅基」的既得利益者之喧嘩；因為這些包括會計、監管機構、國際官僚組織和學者在內的利益及權力只有在稅制越趨複雜繁重時才有機無限伸延擴大。

 

筆者特別鳴謝香港大學工商管理學系程翊同學協助收集及整理本文相關數據及圖表