Universal pensions wishful thinking? Lion Rock Institute says no

Dozens of academics recently took out newspaper ads demanding fiscal reform, long-term welfare planning and government-backed universal retirement protection. The Lion Rock Institute pushes back: for the sake of Hong Kong’s next generation, it firmly opposes universal pensions.

What’s wrong with the academics’ plan?

Progressive profits tax won’t work — firms will split to dodge it. The ads propose progressive corporate profits tax to raise revenue, but the institute says no country does this — companies can simply split operations. If Hong Kong tried, big firms would just break up businesses to escape the progressive rates.

Does the alliance’s proposal add up?

Claims of a HK$300 billion surplus are fantasy. The Alliance for Universal Pensions proposes scrapping CSSA and fruit money, diverting 2.5% each of employer and employee MPF contributions, adding 1.9% profits tax on firms earning over HK$10 million, plus a government seed fund or 1% annual top-up — projecting over HK$300 billion in reserves by 2056. The institute asks: if it really worked, why not offer the formula to debt-crisis Europe? The surplus is wishful thinking; a debt mountain is the likelier outcome.

What are the risks?

Resources shift from the needy to the unneedy; tax and contribution hikes follow. Scrapping CSSA and fruit money takes resources from those in desperate need and hands them to those without — even tycoons like Li Ka-shing could collect while the needy get too little. European politicians started ambitious too, and ended up cutting benefits, raising retirement ages, or hiking contributions and taxes. Once revenues disappoint and the scheme is law, someone must foot the bill — but who?

To understand current MPF contribution arrangements, visit MPF fund comparison.