Background. Methodology

Transcription

1 International Conference on Social Inequality and Mobility in Chinese Societies: Towards a Comparative Study The Impact of Taxation and Social Benefits on Household Income Distribution in Hong Kong Mr. Stephen Leung Kwan-chi Assistant Commissioner (Social) Census and Statistics Department 16 December, 2011 Background Income disparity has always been a highly controversial topic but measurement of income disparity is a complex issue Many factors affect household income distribution Different concepts / definitions of income Government interventions Demographic change (e.g. change in household size and composition) Proper measurement of household income distribution taking the various factors into account will better reflect the economic well-being of households 2

2 Background Public policies for redistribution of household income in place in Hong Kong for many years to alleviate income disparity Study to assess the redistributive effect of government intervention (taxation and social benefits) on household income Several rounds of study conducted based on: General Household Survey (GHS) data in 2005 Population Census / By-census data in 1996, 2001 and 2006 GHS data in 2008 Population Census data in 2011 (to be conducted) 3 Methodology Various concepts of household income in the study Salaries Tax and Property Tax Household Income (as originally collected in GHS) Cash Transfer Pre-transfer Household Income Rates and Government Rent Post-tax Household Income Social Benefits* Post-tax Post-social Transfer Household Income * Social benefits include education benefits, housing benefits and medical benefits 4

3 Methodology Monthly Post-tax Post-social Transfer Household Income (MPHI) = MHI TX RR + EB + HB + MB where: MHI TX RR EB HB MB = Monthly household income which includes income from employment, rental income, income from investment and cash transfer = Monthly salaries tax and property tax = Monthly rates and Government rent = Monthly education benefits = Monthly housing benefits = Monthly medical benefits 5 Salaries Tax and Property Tax TX: the imputed value of salaries tax and property tax For calculating salaries tax All household members are considered qualified for the following types of allowances: Basic allowance Deduction from mandatory contributions to retirement scheme (MPF) Married person allowance (if married) Single parent allowance (if widowed / divorced / separated and living with children aged below 18) 6

4 Salaries Tax and Property Tax TX: the imputed value of salaries tax and property tax For calculating salaries tax (cont d) The household head is additionally assumed to be qualified for the following types of allowances: Dependent child / brother / sister allowance (if living together) Dependent parent / grandparent allowance (if living together) Deduction of home loan interest (if living in owner-occupied quarters) 7 Salaries Tax and Property Tax TX: the imputed value of salaries tax and property tax For calculating property tax Household members who received rental income are subjected to property tax assessment. Example Assumptions / Limitations 8

5 Rates and Government Rent Private housing Owner-occupier Making reference to rates and Government rent data of 2006 By-census based on socio-economic characteristics (e.g. district, household income, housing type and type of accommodation) of the owner-occupiers, adjusted by change in property price since Tenants Making reference to the standard charging percentage of rates and Government rent to rateable value Public rental housing Making reference to the average market rent per block and the standard charging rate as provided by Rating & Valuation Department. 9 Education Benefits EB: the imputed value of education benefits enjoyed by all household members Making reference to level of education, type of schools and average cost subsidised by the Government per student Imputation by different levels: Pre-primary education Primary education Secondary education (incl. matriculation) Vocational education Post-secondary education 10

6 Education Benefits EB: the imputed value of education benefits enjoyed by all household members Additional financial assistance (based on results of means tests on household income) Pre-primary education voucher scheme Kindergarten and child care centre free remission scheme Senior secondary fee remission scheme Tuition fee reimbursement for Project Yi Jin students Tertiary student financial scheme publicly-funded programmes Financial assistance scheme for post-secondary students Student travel subsidy scheme School textbook assistance scheme Examples Assumptions / Limitations 11 Housing Benefits HB: the imputed value of housing benefits enjoyed by households living in public rental housing Making reference to the average ratio of normal rent to assessed market rent for the public rental building concerned Examples Assumptions / Limitations 12

7 13 Medical Benefits MB: the imputed value of medical benefits enjoyed by all household members Doctor consultation in public clinics and hospitalisation in Hospital Authority hospitals Imputed randomly by the estimated utilisation rate for each group of persons (analysed by age, sex, type of housing and household income) and the average public expense per doctor consultation / day of hospitalization Student Health Service and School Dental Care Service Imputed randomly by making reference to number of enrolled students and subsidy for each student Example Assumptions / Limitations 14 Monthly household income before and after adjustment by decile group Decile Group MHI (HK$) MPHI (HK$) Adjustment 1 st 2,800 5, % 2 nd 6,500 9, % 3 rd 9,600 13, % 4 th 12,800 16, % 5 th 16,400 19, % 6 th 20,500 23, % 7 th 25,800 28, % 8 th 33,000 34, % 9 th 45,700 45, % 10 th 102,900 94, % Overall 27,600 29, %

8 Monthly household income before and after adjustment by decile group HK$( 000) st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 15 Decile Group MHI MPHI 16 Shares of monthly household income before and after adjustment 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 10th:37% 9th:17% 8th:12% 7th:9% 6th:7% 5th:6% 4th:5% 3rd:3% 2nd:2% 1st:1% MHI MPHI 10th:32% 9th:16% 8th:12% 7th:10% 6th:8% 5th:7% 4th:6% 3rd:5% 2nd:3% 1st:2%

9 Monthly household income before and after adjustment for selected sub-groups MHI (HK$) MPHI (HK$) Adjustment Elderly households Non-elderly workless households Low-income households Low-income working households 7,500 9, % 7,000 10, % 4,500 8, % 6,900 13, % 17 Conclusion Spread of income disparity narrowed down considerably in the case of post-tax post-social transfer household income distribution after taking into account the redistributive effort of the Government The more disadvantaged groups of households also benefited greatly from the redistributive effort of the Government 18

10 Salaries Tax Example A household with three members (father (40), mother (35) and son (10)), only the household head (father) is economically active with annual assessable income of $400,000 Net chargeable income = $400,000 $216,000 $50,000 $12,000 = $122,000 Married person allowance 1 st child allowance MPF allowance ST = ($40,000 2% + $40,000 7% + $40,000 12% + $2,000 17%) 12 = $ Education Benefits Examples A household with one member studying in kindergarten (satisfying the pre-primary education voucher scheme PEVS ) and one other member studying in government primary school EB = $917 + $2,920 = $3,837 (Monthly) Avg. subsidies for PEVS per month Avg. subsidies for students in Gov. pri. schools per month A household with one member studying in government secondary school (Form 4) and another two members studying in full-time bachelor degree course EB = $3,163 + $18,935 2 = $41,034 (Monthly) 20 Avg. subsidies for senior secondary students in Gov. sec. schools per month Avg. subsidies for full-time bachelor degree students per month

11 Housing Benefits Examples A household living in private housing HB = $0 A household living in public rental housing paying a normal rent of $1,500 per month HB = $1,500 53% # $1,500 = $1,330 # For illustration purpose, assume the average ratio of normal rent to assessed market rent = 53% 21 Medical Benefits Example A household living in public rental housing with monthly household income of $4,000 with one member, female aged 66 (incidence rate for a person with such profile: Doctor consultation 26.0%; Hospitalisation 14.8% ) If this person is selected for imputing medical benefits in respect of both doctor consultation and hospitalisation: MB = $1,475 + $8,639 = $10,114 (Monthly) Avg. subsidies for doctor consultation per month Avg. subsidies for hospitalisation per month 22

12 Assumptions / Limitations Salaries Tax and Property Tax Salaries Tax The following allowances / deductions are not taken into account in the imputation: Disabled dependent allowance Expenses of self-education Charitable donations Property Tax Rental income collected in the survey includes rental income from land, properties or vehicles etc. The amount of property let is not distinguishable The amount of property tax is assessed based on the total rental income 23 Assumptions / Limitations Education Benefits Information on type of school where the students are studying (i.e. government, aided, private) is not available from General Household Survey Random selection of students for imputing education subsidies is applied with reference to information on number of students studying in various types of schools / institutions from Education Bureau and University Grants Committee 24

13 Assumptions / Limitations Housing Benefits Every public rental flat in each block is assumed the same ratio of the normal rent to assessed market rent, irrespective of the size, floor level and direction of flat 25 Assumptions / Limitations Medical Benefits The amount of medical benefits is assumed to be the same for all persons of similar profile (age, sex, type of housing and household income). 26

14 Thank you 27