Search the Community

HONG Kong Financial Secretary John Tsang made a big impact with his maiden budget speech yesterday - as big as HK$70 billion (S$12.6 billion) worth of goodies, to be precise. And the package, which comes on the back of Hong Kong's biggest ever budget surplus of HK$115.6 billion was generally lauded as having something for everyone. It includes income and corporate tax cuts and rebates and allowances for the poor and elderly. Drinkers will cheer the abolition of wine and beer tax, which is aimed at turning the city into a global wine trade hub. Income tax was cut from 16 per cent to 15 per cent, returning it to pre-Sars levels, and a one percentage point drop in corporate tax, to 16.5 per cent, fulfilled a promise made by Chief Executive Donald Tsang in October. There was also a one-off 75 per cent reduction on income tax for 2007/08, up to a limit of HK$25,000 a person. And for those on lower incomes, a one-off HK$8.5 billion injection will put HK$6,000 into each provident fund of those earning HK$10,000 or less a month. At the same time, Mr John Tsang, who took over as finance chief last July, made it clear that he had an eye on the city's long- term future, devoting HK$18 billion to a research endowment fund to support high value-added economic activity. There was also a HK$50 billion pledge, on top of the package, for a health-care reform plan officials are due to propose later this year. Mr Tsang said that an ageing population meant health care is Hong Kong's 'greatest challenge to the stability of long-term finances'. While the entire budget package is expected to take the city into the red this year, it would be more than cushioned by healthy fiscal reserves of HK$485 billion. But in a speech lasting more than 90 minutes, Mr Tsang warned that 'a substantial surplus will not occur every year'. He said this year's bonanza was only possible because income from sources like land sales and stamp duty on share purchases was 'far higher than expected' last year, thanks to China's boom. Hong Kong's growth, he added, is expected to slow to 4-5 per cent this year, after expanding 6.3 per cent last year, due partly to global economic uncertainty amid a slowdown in Europe and the US. 'We should be aware of the possibility that the situation might deteriorate in the near future and that the fallout may be prolonged,' he said. He also warned of rising inflation, while stressing the need to invest heavily in education and to attract talent in the face of increasing global competition. And to face such problems, he said Hong Kong must 'continue to study options on broadening its tax base' - a comment widely seen as a reference to a possible goods and services tax. The government is wary of broaching the issue again, after its last attempt was shot down in 2006 by an angry public, amid fears that it would place an unfair burden on the poor. And apparently mindful of such resistance Mr Tsang yesterday stressed that the 'tax reform options' he would like to see discussed would be 'equitable and conform to the 'ability-to-pay' principle'. http://www.straitstimes.com/Free/Sto...ry_211121.html