THERE is a certain joy to writing these articles for Tax India International. ‘Jjoyous', at least, compared to the other writing I am currently involved with: the 2012 edition of my US tax guide! Attempting to write a 'user-friendly' book about taxation is difficult, especially when the subject matter is not really very user-friendly. Books like this are generally holistic sleeping pills - am I deluding myself by attempting to make a US tax book cynical and humorous, as well as user-friendly?

I'm obviously involved in some research while writing a tax book and one thing that research reveals is that, for the U.S., at least, the stronger the political lobby, the less the likelihood that there will be any cutbacks from the coming deficit reduction legislation very slick (oily?) incentives currently set in place for the petroleum industry and its very effective lobby in Washington, DC.

"For the average family sitting down to their holiday dinner it makes no sense that we will continue to lavish billions of dollars in subsidies on oil corporations while forcing automatic cuts in vital clean air, clean water, wildlife and other domestic discretionary programs." These were the blog writings of the U.S. National Wildlife Federations's Adam Kolton. The American Petroleum Institute has been running ads claiming that higher taxes for the industry would hurt the economy, cost jobs and raise prices. Apparently the API and others have contributed to the coffers of sufficient federally elected officials to survive intact, thus far.

With the feet in cement intransigence attitude towards compromise, 'winner-take all' politics will make things quite interesting in 2012 insofar as both the Presidential and Congressional campaigns are concerned. Yes there is are serious economic problems and tax will enter into the eventual picture - but based upon the results 11 months from now - and then, sometime in 2013, with a new (theoretically) Congress and new term for a President, we are likely to see U.S. tax legislation retro-actively enacted to cover all of 2013. Right now, there's plenty of rhetoric but virtually no action. And while the rhetoric continues, funded, of course, by the lobbyists, the eventual legislation will be very much based upon the agendas of the most powerful, most financially 'well-endowed' lobbies. That's the fault of the democratic process: it has turned into the best system of government that money can buy!

Yet while it does minimize graft within the U.S. tax system, this is definitely not the case in China, where Wang Jiping, former director of the Beijing offices of the State Administration of Taxation, local offices, pleaded not guilty to prosecution graft charges that Wang filtered off approximately 15 million RMB in bribes during his term as head of that agency from 2002 through 2009.

China has to rein in corruption from within the tax system, administering what the public will perceive as harsh punishment. Otherwise, there will be a permanent problem in collections. Obviously Beijing has got to set an example for the rest of the country. If the highest levels of the tax bureaucracy closest to the seat of power in the country cannot be contained, cannot be transparent, how are you going to cure corruption at lower levels, far, far away from that seat of power?

And then there's the situation arising from collecting too much money - for instance, Macao! Has it really been a year??? It seems like yesterday that Macao was giving money back to all who resided there, simply because tax coffers were overflowing and frankly, the government just had absolutely no idea what to do with the money. So they did something that few governments ever do: they gave back money to the people! Hey, it's happening again. The South China Morning Post 'mini' article by Ada Lee, says it all:

Biggest handout yet for Macau residents Government claims to be helping fight against costs

Macau residents will receive their sixth and biggest cash handout next year - 7,000 patacas for permanent residents and 4,200 for non-permanent ones, Chief Executive Fernando Chui Sai-on said in his policy address yesterday. The pataca is tied to the US dollar at the rate of 8 to 1.

The handout is part of the Macau government's slate of schemes to help residents fight inflation and share in the city's economic boom. It will also spend 8.57 billion patacas on extra subsidies for the elderly, students and low-income families.

"The government is very concerned about the underprivileged and the impact of inflation on residents' living conditions," Chiu said. Ask Macanese residents, though, and you are more than likely to get completely different answers…..

Hong Kong did this, too, last year as it took in so much money from Chinese real estate buyers who moved up both the cost of real estate in Hong Kong to higher than stratospheric levels and, as the government pleasantly discovered, the boom in stamp tax revenues was unprecedented. Hong Kong is currently giving out $HK6,000 per person to all permanent residents over the age of 18. The oldest get their checks first - yes, I'm that old - I've already gotten my check! By the way, the Hong Kong dollar is also pegged to the U.S. dollar. This one is 7.8 HK$ = 1 US$. Notice the small difference between the pegged values of the pataca and the Hong Kong dollar. This is why, when you take the ferry from Hong Kong to Macao and take a taxi, paying the taxi fee in Hong Kong dollars, the cab driver will alway give you the change in patacas, not caring about the fact that you have little or no use for patacas. That taxi driver simply supplements his income through cab fare forex!

Guess what - a monumental budget surplus appears to be happening again in Hong Kong with the SAR government, again! Through the accounting firm of Price Waterhouse Coopers, announcing at the end of November (as a quasi-official representative of the government) that it expected a $HK35 billion dollar surplus for the fiscal year ending 31 March 2012. Once again, it is still the stamp tax, along with revenues from land auctions that is responsible for a government that originally projected an $HK8.5 billion deficit. Based upon last year's surplus which I for once accurately projected would be substantially higher than the government was telling us, I predict the same thing, for this year: If they visualized an 8.5 billion loss but are now saying, with 4 months still to go in the fiscal year that they were off target by 43.5 billion, how much do you really think the correct surplus will be? Send me your thoughts and comments and that which is both the most accurate and witty will be quoted in a future article! Remember, we've still got 4 months to go in Hong Kong's fiscal year, so if you want to play the Hong Kong market in a hedge fund swap…..have fun knowing the government will be even richer than before to work at enhancing its financial markets!

What I find interesting are the suggestions that will come from various and sundry parts of the Hong Kong community regarding how to spend the surplus. Agnes Chan, Ernst & Young's regional managing partner suggested that Hong Kong's taxpayers be allowed to deduct up to $HK200,000 for either rent paid or interest paid against a Hong Kong mortgage this coming year. Chan's proposal makes sense from the standpoint of giving the monies back to those who pay taxes in the first place but pales in various comparisons, later on, when you take into account that a substantial portion of revenues comes from land sales, which should go for the benefit of all, rather than just taxpayers. The wealth divide in Hong Kong shows up most starkly, here, where such a huge portion of the population does not even make $HK200,000 a year in income or the proposal to give back that amount as a taxpayer's refund.

Of interest to me, though, is an alternative proposal, also made by Chan, which the South China Morning Post published in a tax article appearing on 30 November. The article stated that the government has also been urged to increase an allowance for taxpayers who support parents and grandparents living in Guangdong. At present, taxpayers are eligible to take a $HK36,000 per dependent but giving economic incentive to those earning under $HK60,000 per month needed assistance against rising prices the most, as the cost of living is rising so dramatically in Hong Kong, making cross border dwelling for retirees more economically feasible.

It is not just for retirees but for those of us ‘older' workers, too! I might be reducing my workload but I'll never truly retire and I've been living in Guangzhou, capital of Guangdong province, for close to 20 years. Quality of life based upon a far lower cost of living (hence, less work!) has made me a happy Pearl River Delta commuter with a mini, mini Hong Kong apartment that I rent and a substantially larger place in Guangzhou for which I happily make monthly mortgage payments in my adopted home town! There will be no tax rebates forthcoming in Guangzhou as there will be, in one way, shape or form, from Hong Kong.

People's Power legislators have also put their proverbial two cents worth of input to the impending surplus. Hong Kong lawmakers Wong Yuk-man and Albert Chan urged the government to 'keep it simple, like the current year, only distribute $HK8,000 to all adult residents of Hong Kong. This would cost approximately $HK56 billion, which the two law makers, based upon prior experience, feel the government will actually show as the surplus, come year end.

As I stated previously, I'll be writing about the Hong Kong surplus at the close of the year, referring back to this article, seeing how close we come to a correct projection….and reporting what the government will actually do with this financial windfall next year.

(The views expresed are personal of the author)