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PS/Lord Goronwy-Roberts
HONG KONG: BUDGET 1978/9
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INDEX
NO
1. The Governor has now provided an outline of the
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21 FFB 1978
the next financial year. This is a revised version or
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provided only a week before and I expect there will be further changes before Budget Day (1 March). Nonetheless, the main features are not likely to be changed and I am submitting now since I believe that the Minister of State should have early notice of the framework of the budget.
See 19
2.
The most important points are that the budget makes provision for all improvements in the social sphere which have been agreed and that an increase of 26% in public spending (albeit from a low base) is planned to pay for these. To that extent we have no grounds for complaint. This will be achieved without any signifi- cant change in the present taxation system. Of the changes that are proposed, the most significant are the application to banks of taxation on interest (an extra HK$160m. in 1978/9 and HK80m. in subsequent years), the abolition of stamp duty at a cost of HK$120m, and the introduction of increased registration fees for luxury cars (which will probably not have much economic significance but will be useful presentationally).
3. It would have been nice to see a more imaginative budget. But it would also have been expecting too much: our correspondence with the Governor has so far failed to move him and his Financial Secretary from their belief that good house-keeping is the primary purpose of financial policy coupled, in the case of Hong Kong, with the supposed need to avoid endangering business confidence at all costs. Until we have convinced them of the value of a more progressive tax system (and agreed with them new and expanded programme of social and economic development), we cannot expect to see such things reflected in the budget.
4. The figures as they now stand show a slight surplus in the forecast for next year. But in recent years revenue has been consistently under-estimated and expenditure over-estimated:
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