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Alo. Mins Lackey:
BOTB DIV.
Stuart HRIOD, FLO.
Cloaks. Foo
DTIHO LONDON HX3031 UKTRADE
FROM HONGKONG
CREDA 10 27/2
FOR MIS LACKEY (CREZ) FROM ASTON
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9/3.
DTI PLEASE COPY TO BOTB, TREASURY, AND FCD FOR STUART (HKIOD) AND CLOAKE (TRADE RELNS AND EXPORT DEPT).
BUDGET
1. FINANCIAL SECRETARY PRESENTED BUDGET THIS (27) AFTERNOON. UNDERSTAND DETAILED SUMMARY HAS BEEN SENT BY GOVERNOR TO FCO.
2. COPY OF FULL TEXT PLUS SUPPORTING DOCUMENTS WILL BE SENT BY US TO ADDRESSEES OF THIS TELEX. SUMMARY OF PRESS COMMENTS WILL BE SIMILARLY DISTRIBUTED.
3.
I WILL SEND FURTHER TELEX TOMORROW DRAWING ATTENTION TO ANY POINTS OF POLICY LIKELY TO AFFECT TRADE PROSPECTS OR CURRENT NEGOTIATIONS
4.1
MAAN FISCAL POINTS ARE AS FOLLOWS
OUTTURN 1973-4:- ESTIMATED SURPLUS OF DOLLARS 500 MILLION (C F ESTIMATE OF DOLLARS 513) FROM WHICH DOLLARS 300 TRANSFERRED TO MTS FUND. LEAVING NET DOLLARS 200. (ALL FIGURES IN MILLION)
4.2
ESTIMATE GROWTH RATE 1974 FOUR PERCENT IN REAL TERMS AND 14-15 PERCENT IN MONEY TERMS TO GIVE A G D P OF DOLLARS THIRTYTWO THOUSAND FOUR HUNDRED MILLION.
4.3
ESTIMATE D REVENUE (1974-5) BEFORE INCREASED TAXES ETC (SEE BELOW) - DOLLARS FIVE THOUSAND SIX HUNDRED AND SEVENTYNINE MILLION EQUAL TO INCREASE OF SEVEN POINTSIX PERCENT OVER 1973-74.
ESTIMATED EXPENDITURE (1974-5) DOLLARS FIVE THOUSAND SEVEN HUNDRED AND FORTY SEVEN MILLION EQUAL TO INCREASE OF THIRTY PER CENT OVER ORIGINAL ESTIMATE FOR 1973-74 AND NINETEEN PER CENT OVER REVISED ESTIMATE. OF TOTAL DOLLARS THREE THOUSAND NINE HUNDRED AND FOURTEEN MILLION IS RECURRENT ACCOUNT AND DOLLARS ONE THOUSAND EIGHT HUNDRED AND THIRTYTHREE MILLION CAPITAL ACCOUNT.
4.5 ESTIMATED OUT TURN FOR 1974-75. AFTER MAKING ALLOWANCE FOR TRANSACTIONS NOT COVERED IN 4.3 AND 4.5. NET ESTIMATED DEFICIT OF DOLLARS ONEHUNDRED AND FIFTY FOUR MILLION.
LÓ
RESERVES. **AVAILABLE FISCAL RESERVES ARE NOT SUBSTANTI AL ENOUGHT TO BE DRAWN DOWN' AND MUST BE KEPT IN HAND IN CASE THE RATE OF GROWTH OF RECURRENT REVENUE IS DISAPPOINTING "L
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CAPITAL EXPENDITURE. CACLULATIONS MADE OVER A THREE YEAR PERIOD ENVISAGE REQUIREMENT OF DOLLARS NINE THOUSAND FOUR HUNDRED MILLION AGAINST AN ESTIMATED DOLLARS FIVETHOUSAND FOUR HUNDRED MILLION OF AVAILABLE FUNDS (IE DOLLARS ONE THOUSAND EIGHT HUNDRED MILLION PER ANNUM) OF THIS DIFFERENCE ONLY DOLLARS TWO THOUSAND AND FORTY MILLION CAN BE COVERED BY HIGHER TAXATION AND LOANS. REST HAS TO BE RECOVERED BY RE-PHASING TO LATER YEARS. THIS MIGHT INCLUDE SOME (RELATIVELY SLIGHT) DEFERMENT ON NEW TOWN AND PUBLIC HOUSING.BUT WILL MAINLY FALL ON OTHER CAPITAL EX- PENDITURE AND DEVELOPMENT WORK WHICH WILL BE RETAINED AT CURRENT YEARS LEVELS.
5.
INCREASED DUTIES AS FOLLOWS
5.0 LIQUOR
INCREASED BY APPROX TWENTYFIVE PERCENT AÐ
VALOREM. PRECISE INCREASES PER GALLON ARE
GRAPE BRANDY DOLLARS TWENTYFOUR
OTHER SPIRITUOUS LIQUOR DOLLARS SIXTEEN AND FIFTY CENTS
SPARKLING WINES DOLLARS ELEVEN
STILL WINES DOLLARS FIVE
CIDER SIXTY CENTS
¡ IMPORTED BEER THIRTY CENTS
NON EUROPEAN TYPE WINES DOLLARS THREE
NON EUROPENA TYPE SPIRITS DOLLARS ONE
LOCAL BEER TWENTY CENTS
NON EUROPEAN TYPE SPIRITS (LOCAL) EIGHTYFIVE CENTS
5.2 TOBACCO DUTY RAISED APPROX TWENTYFIVE PERCENT BY DOLLARS TWO PER POUND FOR UNMANUFACTURED TOBACCO, DOLLARS TWO AND EIGHTY CENTS PER POUND FOR CIGARS, DOLLARS TWO AND SEVENTY CENTS PER POUND FOR CIGARETTES AND DOLLARS TWO AND TWENTY CENTS FOR OTHER MANUFACTURED TOBACCO EXCEPT LOCALLY PREPATED CHINESE TOBACCO (UNCHANGED)
6.
RATES AND TAXES AS FOLLOWS
6.1 RATESM. NEW TERRITORIES RATES TO BE RAISED TO SAME
AS IN URBAN AREAS I E FIFTEEN PERCENT. FULL RATE TO BE APPLIED
TO RESETTLEMENT HOUSING PREVIOUSLY AT FIXED SUB ECONOMIC LEVEL.
6.2 PROPERTY TAX TO BE RAISED ON NON-OWNER OCCUPIED PROPERTIES IN AREAS IN NEW TERRITORIES PREVIOUSLY EXEMPT
6.3
A)
PERSONAL TAX
INCREASED SURCHARGE FOR LATE PAYMENT (TO FIFTEEN PERCENT 8) NO INCREASE IN BASIC TAXM
6.4 TAX RELIEF
A)
INCREASED DEPRECIATION ALLOWANCE FOR PLANT AND MACHINERY TO OFFER ENCOURAGEMENT TO MANUFACTURERS TO RE-EQUIP AND UPGRADE THEIR PLAND AND EQUIPEMTN AS THE ECONOMY FACES THE CHALLENGE OF A NEW AND CHANGING WORLD TRADING ENVIRONMENT'
B)
INCREASED EXEMPTION LIMIT (TO DOLLARS THREEHUNDRED THOUSAND ) FOR ESTATE BUTY
C)
MINOR RELIEFS ON SOME STAMP DUTIES
6.5 VEHICLE TAXES
A) ANNUAL LICENCE FEES FOR PRIVATE CARS RESTRUCTURED FROM EXISTING SIX CATEGORIES TO TWO VIZ ONE THOUSAND FIVEHUNDRED CC AND UNDER DOLLARS FOUR HUNDRED PER ANNUM, ALL OTHERS DOLLARS ONE THOUSAND PA
B) TAXI LICENCE FEES DOUBLED TO DOLLARS THREEUNDRED AND TWENTY
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C) MOTOR CYCLES INCREASED TO DOLLARS TWO HUNDRED FROM DOLLARS SEVENTY
D) GOODS VEHICLES LICENCE FEES INCREASED BY TWENTYFIVE PER CENT FOR TWENTY CWT(DOLLARS THREE UNDRED). THIRTYSIX PERCENT FOR FORTY CWT (DOLLARS SIX HUNDRED), FORTY PERCENT FOR THREE TON
(DOLLARS NINE HUNDRED) AND FIFTEEN PER CENT FOR HEAVY LORRIES (DOLLARS ONE THOUSAND TWO HUNDRED). INCREASES DO NOT APPLY TO CONSTRUCTION SITE VEHICLES
E) PUBLIC LIGHT BUSES LICENCE FEE DOUBLED TO DOLLARS SIX THOUSAND. BUT NO INCREASE ON OTHER BUSES
F) VEHICLE FIRST REGISTRATION TAX. INCREASED FROM TEN PER CENT TO FIFTEEN PERCENT OF VALUE OF VEHICLE. THE ADDITIONAL COMMONWEALTH PREFERENCE TAX APPLIED OTO NON COMMONWEALTH VEHICLES REMAINS FIFTEEN PER CENT
G) DRIVERS LICENCES AND PARKING FEES INCREASED.
7.
THERE ARE A FEW OTHER MINOR INCREASED FEES AND CHARGES PART OF A TIDYING UP OF THE STRUCTURE.
3. NET EFFECT OF THESE TAXES AND CONCESSIONS IS YIELD OF DOLLARS ONEHUNDRED AND SEVENTYFIVE MILLION GIVING FINAL ESTIMATED SURPLUS OF DOLLARS TWENTYONE MILLLION (SERO POINTTHREE PERCENT OF ESTIMATED REVENUE)
9. FINANCIAL SECRETARY CONCLUDED WITH WARNING FOR NEXT FINANCIAL YEAR (1975-76)
A) INCREASE OF STANM