* No Cut In Salaries Tax For Hong Kong This Year, Tang Tells Lawmakers
Financial Secretary Henry Tang is standing by his decision not to propose a reduction in salaries tax this year, but admits he will consider reducing it "once the economic recovery takes stronger root."
Speaking before the Legislative Council on Wednesday, he appealed to lawmakers not to vote against his Budget "simply because they are not satisfied with one particular issue. Should they do so, it will be a case of 'throwing the baby out with the bathwater'".
Concluding the debate on the Second Reading of the Appropriation Bill 2005, Mr Tang acknowledged that this year's Budget had generated considerable debate in the community.
"It has been no easy task to prepare this year's Budget because we have had to address various demands and expectations which are not easily reconcilable," he explained, adding that:
"I am well aware that our economy is still faced with many challenges, and some people may have yet to enjoy the fruits of economic recovery. My aim is therefore to promote economic development and so enable more people to share in those benefits."
He stressed that his plan to abolish estate duty was not robbing the poor to help the rich, as some critics have suggested. Rather, it was aimed mainly at attracting and retaining capital to promote the development of Hong Kong's financial services industry.
"This is expected to bring significant economic benefits to the community. In other words, abolition of estate duty is not only a general tax concession, but also a long-term strategic investment in the economy of Hong Kong," Mr Tang suggested.
Expanded asset-management business would bring additional job opportunities to Hong Kong and facilitate the development of other related industries, benefiting not only asset owners but also many other citizens, he added.
While Hong Kong's financial position has been improving gradually, the jurisdiction still faces the problem of a narrow tax base: At present, about one in three employed people has to pay tax and most of the revenue from salaries tax comes from the minority of taxpayers.
To broaden the tax base, Mr Tang reiterated that he will consider introducing a goods and services tax - after publishing a consultation paper on the subject later this year to seek the public's views.
"We will confirm the exact timing of this exercise after consulting the new Chief Executive," he said.
"It has been suggested that part of the investment income of the Exchange Fund should be transferred to the Government's revenue account to ease our deficit. In view of the unpredictability of the international monetary environment, we must maintain adequate levels of foreign reserves to ensure the stability of the Hong Kong dollar and preserve both local and overseas confidence in our currency," the Financial Secretary continued, concluding that:
"The investment income of the Exchange Fund is volatile and unpredictable and is therefore not a stable source of income. For example, the investment income in 2004 was only about half that for 2003. In view of this, I consider it unnecessary to contemplate making such transfer arrangements at present."
In closing, he urged lawmakers to support his Budget, "to lay a sturdier foundation for Hong Kong's development".
