Mr J A B Stewart (HKGD)
HONG KONG : 1978 BUDGET
SECRET
HKK 100/2
CER 1978
OFFI
шпарвен
jas Nb as t
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1. As I have just seen the enclosures to the Governor's letter to you of 31 January 1978 and his telegram no 156 of 6 February 1978, may I now add to my minute to you of 3 February 1978.
2. My general comment on the Financial Secretary's preview to the Governor of 27 January 1978 is that the order is still wrong. Assuming this is the synopsis of his Budget speech, expenditure should be considered first, and afterwards revenue; this would remove at one step the notion that revenue determines expenditure.
Thus paras 1, 2, 3 and 6 need recasting, though the ordering of paras 11 and 12 is correct.
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3. Telegram 156 shows their quick conversion from a deficit to a surplus which I had earlier suspected and hoisted a warning flag about. I am unhappy about their new proposal to drop the projected small increase (%) in profits tax, bearing in mind the financial community is benefitting substantially already from the proposed removal of stamp duty (HK$ 60+ million). I would have thought that the bouyancy of the revenue permitted even further progress in social expenditure, e.g. reducing some charges etc, rather than being seen as a handback to one (rich) sector of the community.
7 February 1978
Arman funt
Adrian Smith
Senior Economic Adviser
SECRET