South China Morning TimesSince 1997 / Volume XL / No 100 1 May, 2014, Friday / www.scmt.com /HK $8

TODDLER DEFECATION SPARKS CHINESE BOYCOTT OF HKKrystal Lukkrystal.luk@scmt.com

A feud between locals and mainland parents over their son’s evacu-ation on a street in the busy Mongkok was all it took for a boycott of Hong Kong from 1 June by Chinese netizens.

In a video capturing the stifle went viral over the last week. A reporter from Next Magazine re-corded the offence with his camera, evoking the infuriated father to make off with his cam-era memory card and the mother to attack him with the stroller. The stunt did not end until the police’s arrival five minutes later.

The parents were under arrest for suspicion of theft and assault, how-ever the man was re-leased unconditionally while the woman was discharged on bail and has to report back in mid-May.

The Public Cleansing and Prevention of Nui-sances Regulation out-laws persons in care or custody of any child under 12 years of age, to assent such child to an-swer the call of nature

in public places without reasonable pretext.

Since the news hit the Internet, Chinese neti-zens stigmatised Hong Kongers’ perceived lack of empathy and for film-ing the disrobed child. In Hong Kongers’ de-fence, it was uncivilised and unlawful for the parents to allow their son’s excretion, point-ing out there are mobile apps showing public washrooms available in HK.

On a popular mainland forum, a netizen enlist-ed a boycott against HK from 1 June. He assert-ed in his declaration that HK people will be begging for the main-landers’ return if they stopped visiting HK for

months. The testimony echoes the recent belief of mainland Chinese are god to Hong Kongers as they are the consumers.

On the other hand, Hong Kong netizens were looking forward to the boycott, stating “No one cares for your money, you who see shopping as donating.”

The faceoff has escalat-ed to another pledge on the same forum with the heading "Declare war on Hong Kong's civili-

zation!" The writer asks Chinese visitors to let their children relieve themselves on the streets over the coming Labour Day holiday which lasts a week from 1 May.

In response, Hong Kong

netizens called for a photography contest on Facebook telling locals to snap away at toddlers relieving themselves in public as evidence.

As quoted by Glob-al Times, owned by the state news media People’s Daily, Zhang Dinghuai, a profes-sor at the Contempo-rary Chinese Politics Research Institute of Shenzhen University, perverse people have intentionally elevated a simple incident into a battle.

OPINIONShould government give green light to universal pension scheme? See A3

A2 1 May, 2014, Friday South China Morning Times

FOCUSFall of a Dynamic Duo

Designers Stefano Gabbana and Domenico Dolce (from left) Photo: Getty Images

Just as a gloom is casting over a Milan appeals court today, stepping out is the legendary duo in the fash-ion world Domenico Dolce and Stefano Gabbana. The court vindicated a lower court's guilty verdict in their tax trial.

Precluded €1 billion of tax declarations, the pair was found guilty of tax elusion last June. Both the design-ers along with their accoun-tant Luciano Patelli were sentenced to 18 months of jail time, shortened from 20 months considering the statute of limitations on the

presented facts, in addition to a penalty of up to €10 million.

Dolce and Gabbana had been implicated of tax eva-sion almost a decade ago and were hauled into court for using Gado srl, a Lux-embourg-based holding company, to skip taxes on royalties in Italy, where corporate taxes are one of the highest in Europe.

Their attorney, Massimo Dinoia, revoked the accu-sation like always, "I am speechless. We are all as-tounded. We will appeal

the inexplicable judgment to the Supreme Court where it will be amended." stated after the trial.

Back in 2008, the tax au-thorities initiated the in-vestigation in an attempt to claw back unpaid taxes when the global financial crisis took its toll on Italy.

Fashion corporations were targets of the audit partly due to the industry’s excep-tional performance in the country's lengthiest reces-sion since WWII.

"Luxury is one of the few sectors to have done well in recently," a Milan tax spe-cialist at Grant Thornton suggested, "It is simpler to ask for money where it is than going to where it is troubled."

The case was initially an-nulled in April 2011, but re-opened in November next year before the trial. The pair, who closed the Milan shops, bars and restaurants for three days in protest.

Fortunately for them, sen-tences of less than three years are served with house arrest or community ser-vice rather than in jail cells in Italy. What is more, the giants have two shots to appeal the verdict, which often take years to reach a conclusion.

Their namesake label with clothing, handbags and accessories inspired by Dolce's native Sicily is the hard work the designers have put 28 years to create. Amidst the lawsuit, the two have gone on to produce new collections.

“To go back to the clothes in peace,” was Dolce’s wish expressed to Milan newspaper La Repubblica, and that the guilty verdict and its consequent rapport will pull the plug on the powerhouse.

South China Morning Times 1 May, 2014, Friday A3

OPINIONUniversal Retirement Protection Not the Remedy for HKSince the filibuster by four radical pan-democratic legislators to delay the pas-sage of another budget bill in LegCo on Wednesday, the long-discussed univer-sal retirement protection scheme is again under the spotlight.

HK government has been the bull’s eye at various protests for its reluctance in the proposal which has gained considerable trac-tion among the public since 2005. Despite the current HK fiscal reserves at over $800 billion and its long history in Europe, is it necessarily feasible and sustainable in this unique habitat?

The universal pension plan is one of inter-generation, taxing the current work-force to afford the retirees’ benefits. In fact, the two determinants of the future pension one worker will receive are the economic dependency ratio and the real GDP growth rate. If the ratio of economically active population against inactive continues to low-er, there will simply not be enough taxpayers. HK has long been infamous for its fourth world’s lowest birth rate, estimated at 1.17% in 2014. The dependency ra-tio is plunging albeit the coming of mainland im-

migrants. With the invert-ed population pyramid, it is certain the Scheme loses an edge to MPF. Although HK’s economy in the fol-lowing decades cannot be predicted, the government will be able to collect more tax if real wage increas-es under economic spurt, but so will MPF returns increase, and without the restriction by dependen-cy ratio. It is not to argue centralised pension is im-practical in all state, but perhaps only in developing nations where numbers of youths increase in folds.

According to the proposed models in 2011, 2.5% of the future contributions from both employers and employees will be redirect-ed to the Scheme, together with the extra 1.9% prof-its tax for companies with more than $10 million per annum. The government not only has to inject $50 billion as start-up fund, recurrent funding for old age Comprehensive Social Security Assistance (CSSA) and Old Age Allowance (OAA) payments will have to be transferred as well.

Assuming the discount rate is 2%, the government will have to inject $7,500 billion in total from 2011 through 2056 in discounted value, plus an approximate

of $3,500 billion from the extra profits tax. Except the redirected MPF con-tributions, the Scheme still needs an additional $11,000 billion (discounted), far ex-ceed our current fiscal re-serves. Even funding from CSSA and OAA can allevi-ate part of the burden, it is questionable to distribute CSSA money for the poor to all retirees. The raised profits tax does not come without opportunity costs on HK’s economy and em-ployment either.

In spite of such drastic measures, every retirees can only receive $3,000, compared to $1,000 on av-erage from CSSA and OAA. If a 25-year-old employee with an average income re-tires at 65 and uses his MPF fund to join an annuity plan before his death at 85, he can receive $14,500 month-ly at a 4.8% real return rate. Under an employment rate of 60%, a retiree can still enjoy $5,700 more than the fixed pension; if the gov-ernment’s injection and the extra profits tax are to put into an annuity plan, it can reach as much as over $13,000.

There is indeed an urgen-cy to enhance retirement benefits, however universal pension is doomed to fail when the 2% wage growth

is behind the drop in de-pendency ratio by 0.4%. The way to go is to reform the dissatisfactory MPF system.

First, it is crucial all MPFs to disclose their manage-ment fees and past per-formance compared to similar funds. Second, the government needs to dif-ferentiate compensation from retirement funds by canceling the offsetting of Long Service Payment and Severance Payment with employer’s contribution in MPFs. Full MPF benefit portability shall be the ulti-mate goal. Lastly, given the poor investment knowl-edge among commoners, education about MPFs should be strengthened to yield higher returns.

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