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GR 380
ORITY
CYMER/CAT A
FM HONG KONG 060529Z
HKK 100/2
C:
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2
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110
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TO PRIORITY F.C.0 TELNO.156 OF 6 FEBRUARY 78.
FOR STEWART (HKGD) FROM GOVERNOR.
MY TELNO.119 AND LETTER OF 31 JANUARY: 1978/79 BUDGET.
1. THE FIGURES HAVE MOVED APPRECIABLY AND A NEW NOTE, SUPERSEDING
THAT SENT WITH MY LETTER, WILL GO BY WEDNESDAY'S BAG.
2. THE MAIN DIFFERENCES ARE:-
(A)
77/78 SURPLUS INCREASED FROM DOLLARS 960M (960) TO 1,075M (1,075).
(B) 78/79 DRAFT ESTIMATES:-
(C)
(1) REVENUE IS DOLLARS 10,366M (10,366M) (C.F PLUS TWELVE
PERCENT INSTEAD OF NINE).
II)DEFICIT OF DOLLARS 320M (320) HAS BECOME SURPLUS OF
100M (100).
GDP FORECAST FOR 1978 IS STILL NOT FINISHED BUT IT (FOLLOWING WORD UNDERLINED) MAY BE NINE PERCENT IN
REAL TERMS.
(D) ESTIMATE OF TWENTY SIX PERCENT GROWTH IN TOTAL
EXPENDITURE UNCHANGED.
3. IN NEW SITUATION THE PROPOSED INCREASED OF ONE HALF PERCENT
IN PROFITS TAX COULD NOT BE JUSTIFIED, BUT THE F.S WILL ANNOUNCE:-
(A) NEW ARRANGEMENTS FOR THE TAXATION OF BANKS AS FROM 79/80 THAT WILL BRING IN ADDITIONAL DOLLARS 160M (160) THAT YEAR AND DOLLARS 82M (80) PER YEAR THEREAFTER.
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(B) PROBABLY