A
CONFIDENTIAL
BACKGROUND NOTES
NO.
PUBLIC FINANCE
9
Hong Kong receives virtually no financial aid from
Her Majesty's Government. It runs a substantial surplus on the recurrent
budget, from which it finances its own development expenditure, which
has been on a massive scale. The housing programme in particular has
been an outstanding success, and has been carried through entirely from
local resources. C.D. & W. assistance is limited to grants from the
Higher Education allocation for the two universities.
It is a sore
Our reason is that
point in Hong Kong that since the 1945 Act we have not felt able to make
a C.D. & W. allocation to the Hong Kong Government.
they are able to manage without; if they run short of development finance,
they should in our view raise local loans (the public debt is very low)
or increase taxation. But since we provide no aid, we cannot exercise
control over their financial policies; the ultimate responsibility of the
Secretary of State is in practice purely formal, and they are to all
intents and purposes financially autonomous.
no tax
2. Fiscal policy is in fact a matter of some controversy. The standard
rate of tax on earnings and profits was for many years maintained at the
low rate of 121% (though the rate is doubled in certain circumstances on
the highest personal incomes) but was raised to 15% last year;
is charged on income or profits arising outside the Colony. There is no
general tariff and duty is levied only on alcoholic beverages, tobacco,
hydrocarbon oils, table-waters and methyl alcohol imported or manufactured
for internal consumption. The other main sources of revenue are rates on
property, stamp duties, estate duty, taxes on betting and entertainment
and land sales. Annual revenue and expenditure have approximately doubled
over the past five years. There was a budget deficit in 1959/60, in
1965/66 (£8.6m.) and in 1966/67 (provisionally £1.lm.), but in all other
years since 1947 surpluses have been realised.
CONFIDENTIAL
13.