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Reference........
6
Mr JAB Stewart (HKD)
RE
Piafus
RE
0.
CC:
Mr M Stewart (Special Economic Adviser) Mr Hall (FRD)
21 FEB:977
HONG KONG 1977/78 BUDGET
1.
to you.
2.
HKK 100/2
May I refer to the Governor's personal telegram no 155 of 10 February 1977
In general terms it provides proof of our constant belief a surplus of $m 557 in 1976/77 vice a forecast deficit, shows that more could have been done and spent; and some of the self-constraints applied were and are not needed. The proposed Budget reliefs (see 3 below) contain a fair degree of regressive elements, in addition to some neat tidying-up. There is no hint of any income tax reforms or the report of the Inland Revenue Ordinance Review Board. As you suggest, the proposals look more like a housekeeper's accounts and contain no indication of overall budgetary strategy or long term fiscal planning. To my mind the proposals/ speech outlined fall somewhat short of what we might have reasonably exepcted and does not meet in full Lord Goronway-Roberts remit of social equitable finding of the programme (at Agenda Item 2, para 6b of his meeting with the Governor on
書
9 December 1976). It would not be difficult to envisage fiscal reforms of the same order some HK $m 127 which would be less regressive in character and would possess a little more social equity.
-
www
My specific criticisms and queries would be: -
para 7 - what is the latest estimate for % unemployment? (this will show unused capacity)
3.
(a)
(b)
para 10
(c)
para 12
(d)
para 21A
4.
(e)
para 21B
(f)
-
what is the effect on income distribution?
what is the basis for the assumption of a constant Hong Kong $ in 1977/8? (when 1976/7 is showing an appreciation of 7%)
the suppression of local rate increases in the next two financial years is of greater benefit in absolute $ terms to the owners of larger properties (ie higher income groups) than to smaller property owners or those in rented or shanty accommodation
improvements in personal allowances benefit in absolute $ than those with higher incomes and higher marginal rate where there is a progressive system - as there is to a limited extent in Hong Kong, subject to a 15% maximum
para 21C - the increases in estate duty exemptions proposed are a straight
giveaway to the (survivors of) higher income groups which is rather regressive. This is a new aspect which was not mentioned in the Governor's visit
(g)
para 23
- a declining public expenditure/GDP ratio is not to be welcome in
this instance it shows more could be done at these levels
I would suggest that we reserve our position for full comment on the total- ity of the Budget.
15 February 1977
un fun
теме
Adrian Smith
Senior Economic Adviser
G 72/G
8815
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