Background: Hong Kong is known for its simple, predictable, low-rate tax system. This encourages investment and rewards people for their hard work. Also, it is one of the main attributes that has enabled the economy to rebound and flourish so strongly. However, it is also widely recognized that, notwithstanding its relative strengths, Hong Kong tax system has some fundamental flaws and weaknesses. Hong Kong's existing tax base is very narrow by international standards. It relies on only a very limited range of taxes and non-tax income to support public expenditure. Income from these sources varies widely according to economic conditions outside anyone's control. This has greatly constrained the government's ability to make long-term plans and investment decisions to sustain growth and development. It also affects the responsiveness to the challenges increasingly faced. Required: 1. Briefly describe the Hong Kong tax system. What are the major updates and changes in recent years? What are the advantages and disadvantages of the existing system? (10%) Assume the following two scenarios are separate and independent: 2. Scenario A: Broaden the tax base One way to increase tax revenue for the government is to increase the number of tax types. Briefly describe the existing tax types in Hong Kong. Is/Are there any tax type(s) introduced in Hong Kong in the past but no longer exist? Is/Are there any tax type(s) never introduced in Hong Kong but has the potential to become a new member of the family? If so, please state in detail and express your opinion, including but not limited to the advantages and disadvantages of such tax type (s). (40\%) 3. Scenario B: Increase the tax rates Another way to increase tax revenue for the government is to increase tax rates. Briefly describe the existing tax rates in Hong Kong. Do you think it would be a good idea to increase tax rates? How would you estimate the overall effect of increasing tax rates? With higher tax rates and potentially fewer taxpayers, would you expect the total tax revenue increase or decrease? In your opinion, how many percentage points should be added for each of the existing tax types? (40\%) 4. Conclude your findings, finalize your decisions, and discuss the possibility and feasibility of a tax reform in Hong Kong. (10\%)